by Mark J. Welch . . . last updated 6/12/96
After long study, the Estate Planning, Trust and Probate Law Section of the State Bar of California has recommended adoption of "informal probate administration" as an optional form of estate administration in California, following the lead of many other states.
In Mid-April 1996, I learned that the executive committee of the Alameda County Bar Association has voted to oppose informal probate administration. I believe this is a mistake and that attorneys should embrace informal administration. (I have also heard through the "grapevine" that the State Bar committee may also have decided to drop its proposal.)
What Is Informal Probate Administration? Currently, in California, when someone dies and leaves more than $60,000 (gross value) of property to someone other than a surviving spouse, a formal court-supervised probate proceeding is required. Under "informal probate," some of the court-supervised steps would be removed from the process, although any heir could ask that formal probate be required, or could petition the court for specific actions.
Informal probate would also eliminate the archaic concept of "statutory probate fees" for the executor and attorney, which allow lawyers to collect huge percentage fees for working on large estates, while refusing to accept smaller estates (or accepting them but demanding "extraordinary fees").
As an example of "statutory fees," I recently finished the administration of the probate estate of a man who died with a net worth of about $1.5 million (the probate estate was valued at $1.7 million, since probate doesn't reflect debts). The statutory probate fee would have been about $28,000, but my time and expenses in handling the case totalled only $5,808.61 (based on my regular rate of $160 per hour). I believe that it would be unconscionable for me to charge the statutory probate fee -- but thousands of other attorneys don't share my view. Guess which attorneys oppose "informal administration?"
Of course, California residents can already avoid formal probate and implement "informal probate administration" by preparing and executing a "revocable living trust," but living trusts are complex documents that generally require hiring an attorney. Thus, to avoid probate attorney's fees, the client must hire a probate attorney to prepare a trust. In addition, the client must change the way property is owned, and if the client fails to register property in the name of the trust, a court proceeding is still required to confirm its tranfer to the client's heirs.
Some states have adopted "informal probate" to eliminate the most onerous burdens of formal probate administration. Other states have focused on the most unfair aspect of probate administration and have repealed their "statutory fee" laws, replacing them with laws that permit an attorney to earn only a "reasonable fee."
What are the drawbacks of "informal administration"? One is the risk of undetected fraud or theft by an executor. But in many estates, the family agrees to "waive" the formal accounting, which creates the same risk. Even in estates that are carefully examined, there is wide room for deceptive bookkeeping, and no meaningful penalty is imposed on executors who simply abscond with an estate's assets and fail to provide any accounting at all. It can take years to prove theft, and by then the executor is dead, missing, or bankrupt.
I believe that informal estate administration would provide a meaningful benefit to hundreds of thousands of California families, and the benefits far outweigh any risks.
If informal probate administration is not approved, I believe that the legislature should at least repeal the statutory fee schedule and should replace it with a law that requires all probate attorneys to (1) disclose how their fees are computed at the beginning of a case, and disclose that fees are negotiable and not fixed by the court, and (2) enter into a written fee agreement with the client, with the form of the agreement either established by statute ot subject to later court approval for the amount of attorney's fees. I continue to be shocked that many attorneys deliberately do not provide fee agreements to their clients but simply say "the fee will be set by the court at the end of the case," leaving the final fee amount to be a shock to the client.
Alternatively, if attorneys succeed in retaining statutory fee schedules based on the usually-false claim that large fees in large cases make up for very small fees in very small cases, the law should mandate that attorneys who take large fees also accept smaller cases without seeking extra fees for those cases.