Lorbieski: Getting attorney fees in will contests, contested guardianships

It’s always surprised me that we decided to depart from the English Rule where the losing party pays the winner’s fees, given how competitive we are as a society. For clients, the American Rule requiring each party to pay their own attorney fees, regardless of who wins a case, can make a win feel like less of a victory. That might explain why there are so many exceptions to the American Rule. This article explores the statutory exceptions to the American Rule that allow for payment of your client’s attorney fees in will contests and contested guardianships by someone other than your client.

Indiana Code § 29-1-10-13 provides for payment of a personal representative’s attorney fees in an estate administration. The “personal representative” of an estate includes an executor named in a will, as well as a special administrator. I.C. 29-1-1-3(30). Section 29-1-14-9 of the Probate Code identifies the preference for payment of claims in an estate administration, and the costs and expenses of administration are at the top of the list, before funeral expenses, claims filed by creditors of the estate and distributions to beneficiaries. It is easy to understand the policy for allowing personal representatives to pay their attorney fees with estate assets because the personal representative is responsible for carrying out the decedent’s wishes, and most individuals would decline to serve as personal representative if they had to pay for their own attorney. It is also easy to understand why a beneficiary of an estate might scrutinize the fees charged by counsel for the personal representative because those fees reduce their inheritance. While your time entries in your invoices should always be clear and complete, you should be particularly critical of invoices you issue in cases in which you intend to seek payment from estate assets, or anyone other than your client.

You would be correct to assume that the attorney fees a personal representative incurs defending the will they probated in a will contest filed by a beneficiary of a will can also be paid with estate assets. The Probate Code leaves no doubt by including an additional statute expressly authorizing payment of the personal representative’s fees in a will contest. I.C. 29-1-10-14. However, the personal representative isn’t the only one who can recover their fees from estate assets in a will contest, because this statute also allows for payment of attorney fees incurred by the beneficiary of a prior will who filed the will contest. The policy for allowing this exception to the American Rule is to encourage “resisting the probate of a will where there are reasonable grounds or probable cause for such proceedings in good faith, without requiring any party to underwrite the expense associated with loss.” In re Est. of Goldman, 813 N.E.2d 784, 787 (Ind. Ct. App. 2004). One nuance in the payment of attorney fees in will contests that is often overlooked is that a beneficiary contesting a will is only entitled to payment of their attorney fees from estate assets if they are a beneficiary of a prior will that they are promoting in the will contest. See I.C. 29-1-7-17.5. In other words, if a beneficiary files a will contest challenging a will that is the only known will of a decedent, in favor of division of the decedent’s estate according to statute (i.e., intestate succession), that beneficiary is not entitled to payment of their attorney fees from estate assets.

While the ability to seek payment of attorney fees in will contests from estate assets can make collection of your attorney fees easier, payment of all your fees is not guaranteed, because each statute allowing for payment of fees with estate assets requires your fees to be reasonable.

Some Indiana counties address the reasonableness requirement for payment of a personal representative’s attorney fees in probate administration by providing a calculation for permissible fees in a local rule, tied to the size of the estate. Local rules for calculation of attorney fees in a probate administration may not apply directly to the determination of the reasonableness of attorney fees in a will contest, but they are instructive. For example, if the local rule permits administration fees up to 6% of the value of the estate and the fees requested in a will contest are 50% of the value of the estate, the court may not view those fees as reasonable. Other considerations for determining the reasonableness of attorney fees in a will contest include the rates charged in the market for similar work and the complexity of the case.

As in will contests, both sides of a contested guardianship may seek payment of their attorney fees from guardianship assets. I.C. 29-3-4-4; 29-3-9-9. The rationale for allowing payment of attorney fees with the incapacitated person’s funds is to encourage individuals to take action to benefit the incapacitated person. That is why the statutes authorizing payment for services rendered by a guardian, attorney, physician or other person from property owned by the incapacitated person expressly require the services to be provided in good faith and beneficial to the protected person, in addition to the compensation being reasonable.

For good reason, the scrutiny of attorney fees in guardianship cases is just as high as a will contest, or perhaps higher. A common fact pattern in will contests involves a personal representative offering a will for probate under which they are also a beneficiary. The beneficiary challenging the probated will is often a relative of the personal representative and recipient of a larger inheritance under a prior will. In this fact pattern, both the personal representative promoting the probated will and the beneficiary challenging the will are reducing their own inheritances by seeking payment of the attorney fees they incur in the will contest from estate assets. Therefore, it is common for the parties in a will contest to be motivated to monitor their attorney fees to protect their inheritance. In contrast, although guardianship cases also commonly involve relatives that cannot agree, the dispute is not a disagreement about the wishes of a deceased relative, but is instead a disagreement about decision-making authority for a living, impaired relative. As such, parties in a contested guardianship that seek payment of their attorney fees are reducing only the incapacitated person’s funds at a time when the incapacitated person’s income is often limited and expenses for their care and medicine are often high. Under these differing circumstances, you can understand that a court may define the reasonableness of attorney fees requested by relatives in a contested guardianship differently than a will contest.

Because payment of all your fees by someone other than your client is not guaranteed in either a will contest or contested guardianship, you should adopt these best practices:

1. Address the responsibility for payment of any fees that may not be approved by the court in your engagement letter.

2. Discuss the options, but not guarantees, for payment of your fees by someone other than your client with your client early in the engagement.

3. Issue detailed invoices to your client monthly.•

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Michele L. Lorbieski is a partner at Lewis Wagner LLP. Opinions expressed are those of the author.