If you accept your nomination to act as successor Trustee under a Living Trust established by a Trustmaker who has become incapacitated, then we will charge our attorney’s fees on an hourly basis, as that is, in our opinion, the only effective method that can be utilized.
If, on the other hand, you accept your nomination to act as successor Trustee under a Living Trust established by a Trustmaker who is deceased, then we recommend charging attorney’s fees using our Unit Billing System, which is described below.
Historically, there have been two primary methods used in charging attorney’s fees for Trust administration matters after a Trustmaker’s death (“Post-Death Matters”): (1) charging a Specific Dollar Fee that is based upon a percentage of the value of the Estate; and (2) charging a fee on an Hourly Basis, with or without an estimate of the total hours that will be involved.
In our experience, it has often proved difficult to quote, in advance, a specific dollar fee, as the time it takes to complete all Post-Death Matters can last up to 2 years, making it almost impossible to anticipate the specific amount of time that will be spent during such an extended period. On the other hand, quoting a specific dollar fee that is based upon a percentage of the value of the Estate assets may not have any bearing whatsoever upon the amount and value of the professional services that will be rendered, and can oftentimes result in much higher attorney’s fees than should otherwise be charged. As a result, this method has proven to be unsatisfactory.
The alternative method of quoting a fee on an hourly basis for all Post-Death Matters has also proven to be unsatisfactory, as, again, it is difficult to anticipate the specific amount of time that will need to be spent over an extended period. As a result, any estimate of the total hours to be involved will, by necessity, be open-ended, and will also be somewhat meaningless for planning purposes. In addition, charging fees on an hourly basis has not proven to be a system that (a) encourages a law firm to be efficient in managing its time and resources, and in completing all Post-Death Matters in a timely manner, or (b) encourages the Trustee to contact the attorney when they have a legitimate question, for fear of being “nickled-and-dimed.”
Based upon our experience in this area since 1978, we have learned that it is important that a specific dollar fee for all Post-Death Matters be quoted, in advance, with as much certainty as possible. In that way, both the beneficiaries of the Trust, as well as the law firm, can plan accordingly.
For that reason we have adopted our “Unit Billing System.”
We have created a spreadsheet that lists all of the potential projects that might need to be included in the Post-Death Matters for any hypothetical Trust. Each project is then assigned a number of Units, and all Units are assigned a uniform fixed dollar value. No Trustee in any Trust Administration would ever need to complete all of the potential projects that are listed.
For example, preparing and filing an Illinois Estate Tax Return is one of the potential projects that are listed, and there are a specific number of Units assigned to that project. However, if no Illinois Estate Tax Return needs to be prepared and filed, that project does not apply.
Once we know the specific projects that will need to be completed, we simply add up the number of units assigned to those specific projects, and multiply the total number of Units by the uniform per Unit dollar value. The result represents the attorney’s fees that will be charged for that particular Trust Administration.
To be fair, our Unit Billing System does not provide 100% certainty for planning purposes, as there are many issues, such as Trust contests, litigation, and audits of income, gift, or estate tax returns, which can arise after a person dies. However, in the great majority of Trust Administrations, the Unit Billing System has proven to be an excellent method in establishing reasonable, specific dollar attorney’s fees for all Post-Death Matters.
As you will note, our Unit Billing System is not dependent upon the value of the assets in the Estate (and regardless of whether “Estate” is defined to include non-Trust assets), is not dependent upon the total hours of time spent by our firm, and includes all charges for photocopying, postage, messenger or courier fees, and follow-up calls, correspondence, and Emails with our clients and the advisors they authorize us to contact. The only additions to the fees charged using our Unit Billing System are for any client-approved amounts we advance to third parties such as appraisers, security evaluators, accountants, courts, or other governmental entities.
For the above reasons, our Unit Billing System has become extremely popular since we adopted it in 2001.
© 2021 Joseph C. Johnson, P.C.