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Probate Court Decides Tax Issue

A New York Probate Lawyer said this is a proceeding submitted for decision wherein the issue is the source of payment for fees awarded to a guardian ad litem. In this probate proceeding, the will “pours over” into an inter vivos trust. The court is tasked to decide whether trust assets can be used to pay all or part of the fee under SCPA 405(1).

The court finds that the fee may be paid from trust assets.

A New York Estate Lawyer said on 24 January 2006, F died a resident of Nassau County. On 24 October 2003, he had created the “F Revocable Trust U/A dated 24 October 2003.” At that time, F also executed his will, the instrument that is offered for probate. Both instruments were drafted by the decedent’s long-time attorney who also supervised the execution of both documents. As is customary with estate plans of this sort, the bulk of the decedent’s assets were transferred to the trust while he was alive. As a result, the will was designed to be a “catch all” so that any stray assets left in the decedent’s estate would be captured and distributed in accord with the terms of the trust. The probate petition reflects a probate estate of less than $10,000.00 while the trust holds assets close to $1,000,000.00.

A New York Estate Lawyer said the guardian ad litem, who was appointed to represent the interests of the decedent’s daughter, examined the circumstances surrounding the execution of both the trust and the will. In her affidavit of services the guardian ad litem stated that she spent 7.2 hours on the matter, representing a charge of $2,828.00 for services rendered.

It should be noted that SCPA 405(1) governs the compensation of a guardian ad litem. It provides that said fee may be “payable from any or all of the following, in such proportion as directed by the court: a) the estate; b) the interest of the person under disability; or, c) for good cause shown, any other party.”

Nassau County Probate Lawyers said that while SCPA 405 generally contemplates the fee of the guardian ad litem in a probate proceeding will be paid out of estate assets or the ward’s share of the probate estate, the circumstances before the court justify a different result.

In a probate proceeding that involves a will that pours over into a pre-existing inter vivos trust, that trust is a party to the probate proceeding either via its trustees or its beneficiaries and either as a cited or noticed party. The responsibilities of the guardian ad litem included a review and investigation of both the will and the trust. In Matter of Stralem,it was held that while the following is extremely unlikely to ever occur, it does present a scenario where a legal fee adjustment would be mandated. For example, if A died leaving a testamentary estate of $100,000 and bequeathed $75,000 to B but also exercised a power of appointment over the remainder of a trust of over $100 million in favor of C where the default beneficiary was D, one can imagine a very costly probate contest brought by D and defended by C, the nominated executor. It is also not hard to imagine legal expenses far exceeding $100,000. The question is where the will contest to be settled between C and D, would it be appropriate to wipe out the estate in legal fees and thus extinguish B’s bequest of $75,000? The court finds that the answer would clearly be that it would be inappropriate.

Based on the foregoing, the court holds that the assets of the F Revocable Trust U/A dated 24 October 2003 may be used as a source of funds to pay the fee of the guardian ad litem.

In Matter of Stortecky v Mazzone and Matter of Vitole, Matter of Phelan, it was held that the court bears the ultimate responsibility for approving legal fees that are charged to an estate and has the discretion to determine what constitutes reasonable compensation for legal services rendered in the course of the administration of an estate. This remains true even in the event that the parties have consented to the requested fee akin to Matter of Stortecky v Mazzone and Matter of Phelan.

A Staten Island Probate Lawyer said in Matter Of Brehm and Matter of Wilhelm, the court notes that 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.

In evaluating the cost of legal services, the court may consider a number of factors. These include: the time spent akin to Matter of Kelly; the complexity of the questions involved akin to Matter of Coughlin; the nature of the services provided akin to Matter of Von Hofe; the amount and complexity of litigation required akin to Matter of Sabatino; the amounts involved and the benefit resulting from the execution of such services aki to Matter of Shalman; the lawyer’s experience and reputation akin to Matter of Brehm; and, the customary fee charged by the Bar for similar services akin to Matter of Freeman and Matter of Potts.

In discharging this duty to review fees, the court cannot apply a selected few factors which might be more favorable to one position or another but must strike a balance by considering all of the elements set forth in Matter of Potts, Matter of Freeman and Matter of Berkman.

Morerover, the legal fee must bear a reasonable relationship to the size of the estate and to the interest of the ward of the guardian ad litem as in Matter of McCranor, Matter of Kauffman, Matter of Phipps and Matter of Ault. Further, it is well-settled that time spent is, in fact, the least important factor considered by a court in fixing reasonable compensation akin to Matter of Snell, Matter of Potts, and Matter of Kentana.

Under SCPA 405, the guardian ad litem is entitled to a fee for his or her services rendered. These factors apply equally to an attorney retained by a fiduciary or to the court-appointed guardian ad litem as was also held in Matter of Graham, Matter of Burk, Matter of Ault, Matter of Berkman, Matter of Burnett and Matter of Reisman. Moreover, the nature of the role played by the guardian ad litem is an additional consideration in determining his or her fee as held in Matter of Ziegler.

Generally, the fee of a guardian ad litem is an administration expense of an estate and is paid from estate assets but Matter of Stralem is an exception. However, a party may be charged with payment of the compensation of a guardian ad litem where the actions of such party generated unnecessary, unfounded, or purely self-serving litigation that resulted in the appointment of a guardian in accordance with SCPA 405 and based on the ruling in Matter of Ault.

The burden with respect to establishing the reasonable value of legal services performed rests on the attorney performing those services similar to the rulings in Matter of Potts and Matter of Spatt.

Contemporaneous records of legal time spent on estate matters are important to the court in the determining whether the amount of time spent was reasonable for the various tasks performed as was also held in Matter of Phelan, Matter of Von Hofe. In the absence of contemporaneous time records, little weight is given to estimates of time after the services have been performed as ruled in Matter of Phelan. This applies to the fee of a guardian ad litem as was held in Matter of Carbone.

Therefore, the court approves the fee of the guardian ad litem in the amount requested, $2,828.00 and orders that it will be paid from the trust assets within (30) days of the date of this decision.

Bronx County Probate Lawyers, Bronx County Last Will and Testament Lawyers and Stephen Bilkis & Associates will gladly discuss with you the issues and pertinent laws mentioned in the case above. Should you wish to seek our advice, please feel free to call our toll free numbers or visit our office nearest you. A team of experts are waiting.

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