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Court Discusses Cy Pres Doctrine

The Facts of the Case:

On 15 June 2004, the decedent died testate at the age of 74 years of old, without a spouse or issue. The decedent’s last will and testament dated 21 November 1996 was admitted to probate, a will contest proceeding, by decree dated 29 September 2005. The will named a certain person as the nominated executor (for purposes of estate administration) who predeceased the decedent. Thus, letters testamentary issued to the nominated substitute executor, on 30 September 2005. The attorney who prepared the will filed a disclosure statement executed by the decedent on 21 November 1996, which complied with the statutory requirements as it then existed; filed with the court his affidavit that was sworn to on 6 October 2004 and his affidavit sworn to on 30 October 2004.

Thereafter, the attorney has filed his account as executor for the period from 15 April 2005 to 31 January 2009. The account shows total charges of $951,949.88, total credits of $534,915.54 and a balance on hand of $417,034.34. The petitioner is seeking a decree judicially settling the account, approving legal fees, accounting fees and commissions, relief under the doctrine of cy pres as to two charities named in the will that are no longer in existence and approval to deposit the remaining assets on hand with the New York State Comptroller on behalf of any unknown distributees of the decedent. The Attorney General of New York appeared and filed objections to certain legal fees requested by the petitioner’s firm and to the amount of the executor’s commissions as calculated. A New York Probate Lawyer said the Attorney General supports the petitioner’s requests that the balance of the residuary estate be deposited with the New York State Comptroller and that the court direct that the bequests to the two charities no longer in existence be distributed to charities with substantially similar purposes.

The Ruling of the Court:

The law, specifically, EPTL 8-1.1, gives the court the authority to substitute another charitable beneficiary named in a decedent’s will in place of the charitable legatee named in the will which no longer exists. Long Island Probate Lawyers said the power to prevent the failure of and to give effect to the dispositions for charitable purposes is not defeated by the circumstance that the beneficiary of any such disposition does not exist. Before the cy pres power may be applied, it must be shown that the testator’s principal intent was a general charitable one rather than to benefit only the named charity.

Here, the doctrine need not be applied since the decedent directed that 10 percent of his gross estate be distributed in equal shares to 30 charities or to those that existed at the time the decedent died. Thus, the decedent anticipated the possibility that one or more of the named charities might no longer be in existence at the time of his death and provided that the bequest go to those in existence at the time of his death. Accordingly, 10 percent of the decedent’s gross estate is to be distributed in equal shares to the 28 other charities in existence.

On the prayer to deposit the net assets of the estate with the New York State Comptroller, an exhaustive search for any distributees the decedent may have had was made and affidavits of due diligence were submitted thereto. As a result, the court is satisfied that the decedent’s parents and grandparents predeceased the decedent and that the decedent never married and had no issue, natural or adopted; the court is satisfied that a diligent effort was made to locate any paternal or maternal aunts, uncles or cousins of the decedent and that the search yielded no known distributees. Nonetheless, the record does not support a definitive conclusion that no such people exist. Thus, the court directs the petitioner to deposit the balance of the residuary estate with the New York State Comptroller on behalf of any unknown distributees of the decedent.

On the cost of legal services, the court may consider a number of factors, including: the time spent; the complexity of the questions involved; the nature of the services provided; the amount of estate litigation required; the amounts involved and the benefit resulting from the execution of such services; the lawyer’s experience and reputation; and the customary fee charged by the Bar for similar services. In discharging this duty to review fees, the court cannot apply a selected few factors that might be more favorable to one position or another, but must strike a balance by considering all of the elements; and the legal fee must bear a reasonable relationship to the size of the estate. Brooklyn Probate Lawyers said as a rule, a sizeable estate permits adequate compensation, but nothing beyond that. The size of the estate can operate as a limitation on the fees payable, without constituting an adverse reflection on the services provided. The burden with respect to establishing the reasonable value of legal services performed rests on the attorney performing those services. Contemporaneous records of legal time spent on estate matters are important to the court in determining whether the amount of time spent was reasonable for the various tasks performed. While there is no hard and fast rule to calculate reasonable compensation to an attorney in every case, the Surrogate is required to exercise his or her authority with reason, proper discretion and not arbitrarily.

Here, the court is aware of the monumental amount of work done by the petitioner in relation to the estate. However, a review of the time records provided shows that some of the services performed were executorial in nature, for which the petitioner will be compensated by the executor’s commissions to which he is entitled. Thus, by reason of this, and due to the size of the estate, the fees of other attorneys and accountants who performed work for the petitioner and the fact that the petitioner’s firm was paid $5,000.00 in relation to the personal injury action, the court approves the fees already paid, including the $5,000.00 to the law firm, and approves payment to petitioner of additional fees of $25,000.00. Although the petitioner has waived payment of most disbursements, he is seeking approval of the payment of court filing fees in the amount of $1,235.00, which the court hereby approves. In addition, the court also approves the payment for the legal services of another law firm hired by petitioner to defend the personal injury action in which the decedent was named a defendant. The amount of $150,000.00 was paid from the estate to settle the action and that the lawyer was paid $6,409.94 for his services.

On the payment of the accountants’ fees, normally, an accountant’s services are not compensable from estate assets unless there are unusual circumstances that require the expertise of an accountant. The fee for such services is generally held to be included in the fee of the attorney for the fiduciary. Where the legal fees do not include compensation for services rendered by the accountant, there is no duplication and the legal fee is not automatically reduced by the accounting fee.

Here, the petitioner retained the services of accountant-one, who was paid $6,000.00 for the accounting services he performed. The billing actually totaled $10,364.43 in fees and disbursements, but agreed to the reduced fee of $6,000.00min view of the complications that plagued the estate. The court finds that the work performed was necessary and not duplicative of other services for which fees were paid, thus, approves the reduced amount of $6,000.00. The petitioner also retained the services of accountant-two, an accounting firm, and is seeking approval of the $14,125.00 fee paid to that firm. However, the statement they provided did not contain any details at all about any of the services they rendered; plus, it contained multiple entries for data entry and copying, which are generally not billable to the client. For this reason, the court cannot approve any portion of the fee without being able to ascertain whether the services were necessary and reasonable. Thus, the petitioner is directed to obtain and file a detailed billing statement. Otherwise, the fees paid to that firm will be disallowed and will have to be refunded to the estate. Lastly, the petitioner also hired accountant-three in connection to preparing the estate account, and is seeking approval to pay $6,000.00. These fees are unpaid. The court finds that the bills provided do not appear to be duplicative of those performed by the petitioner or the other accountants, thus, the court approves its payment.

The executor’s commissions are approved subject to audit.

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