Maryland Probate Fees and Commissions—A Practitioner’s Guide to the Basics

FOR YOUR PRACTICE | ESTATES AND TRUSTS

Maryland Probate Fees and Commissions—A Practitioner’s Guide to the Basics

BY ELIZABETH ANN FITCH, ESQ.

IN MARYLAND, PROBATE ASSETS may be used to pay fees to attorneys and commissions to personal representatives for their services to an estate. When counseling clients and administering estates, practitioners are guided by Title 7 of Maryland’s Estates and Trusts Code, Title 6 of the Maryland Rules, and the Rules of Professional Conduct. For decades, the judiciary has steadily authored binding authority analyzing the intersection of these authorities, and in 1973, our highest court developed six factors to consider when determining the amount of fees and commissions to be paid from a probate estate.

While well-settled authorities set forth clear guidance regarding how and when personal representatives and attorneys may be compensated, legal professionals often conflate the rules governing the payment of commissions (which are clearly capped) with the rules governing the payment of fees (which are governed by a reasonableness standard). This article provides a basic overview of codes, rules, and leading cases governing the payment of fees and commissions from Maryland probate estates.

While well-settled authorities set forth clear guidance regarding how and when personal representatives and attorneys may be compensated, legal professionals often conflate the rules governing the payment of commissions (which are clearly capped) with the rules governing the payment of fees (which are governed by a reasonableness standard).

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The General Rule: Personal representatives and attorneys are both entitled to reasonable compensation.1 In a simple estate where there is only a personal representative, calculating commissions is a straightforward process set forth by the legislature. “Unless the will provides a larger measure of compensation, on petition filed in reasonable detail by the personal representative or special administrator, the court may allow the commissions it considers appropriate.”2 Appropriate commissions may not exceed the statutory cap set forth by 7-601(b)(2). Specifically, where the property subject to administration is over $20,000, the maximum 1 2

Md. Code Ann., Est. and Trusts §§ 7-601(a)(1) and 7-602(a). § 7-601(b)(1). , estate’s,estate’s

allowable commission is “$1,800 plus 3.6% of the excess over $20,000.”3 It is an abuse of discretion for the court to award commissions that exceed the 7-601(b)(2) calculation.

While “commissions allowed [to] a personal representative and the fee allowed [to] his counsel should be considered together by the orphans’ court,”4 where an attorney is retained to represent the estate, “compensation shall be fair and reasonable in the light of all the circumstances to be considered in fixing the fee of an attorney.”5 Importantly, an attorney has no right to estate funds until funds are both earned and approved by the court.6 “On the filing of a petition in reasonable detail by the personal representative or the attorney, the court may allow a counsel fee to an attorney employed by the personal representative for legal services.”7 There is a “benefit to the estate requirement” that is firmly embedded in 7-602. 8 Indeed, the estate should compensate counsel for routine estate administration services and for advising the personal representatives in addition to extraordinary work, such as preparation of federal estate tax returns or litigation because these things benefit the estate. However, the estate should not compensate counsel (in addition to the personal representative) for performing routine work of executors or administrators such as opening a bank account, procuring appraisals, or corresponding with creditors.9 To allow otherwise would result in estates paying the cost of administrative tasks twice, first through the personal representative’s commission and then to the attorney.10 In other words, if the personal representative delegates administrative work to counsel, counsel should be paid for doing the work routinely performed by the personal representative, and commissions due to the personal representative should be reduced.

[] who defends or prosecutes a proceeding in good faith and with just cause shall be entitled to receive necessary expenses and disbursements from the estate regardless of the outcome of the proceeding.”14 “The amount of compensation or attorney’s fees consented to by all interested persons is presumed to be reasonable” when awarding fees pursuant to 7-603.15 Elective Share Cases: In addition to compensation provided for in Subtitle 6, specifically the maximum commission formula within 7-601(b) (2), “a personal representative is entitled to reasonable commissions or attorney’s fees, as determined by the court, in connection with an election by a surviving spouse to take an elective share[].”16 Presumably, reasonable commissions or fees may be determined in light of the value of the augmented estate where a surviving spouse elects against a will.

Payment of Fees and Commissions by Court Order: The payment of fees and commissions from the probate estate is generally subject to court approval.17 To obtain court approval for fees and commissions, a petition for the same must comply with Md. R. 6-416. Specifically, the petition for fees and commissions “shall be verified and shall state: (a) the amount of all fees or commissions previously allowed; (b) the amount

Litigation Fees:

While the ‘benefit to the estate’ requirement is firmly embedded in 7-602, the application of 7-603, which governs the payment of litigation expenses, omits that requirement.

Where legal work extends beyond routine estate administration, the personal representative is entitled to reimbursement of expenses and disbursements regardless of the outcome of the proceeding.11 While the ‘benefit to the estate’ requirement is firmly embedded in 7-602, 12 the application of 7-603, which governs the payment of litigation expenses, omits that requirement.13 Instead, “[a] personal representative

of fees or commissions that the petitioner reasonably estimates will be requested in the future; (c) the amount of fees or commissions currently requested; (d) the basis for the current request in reasonable detail; and (e) that the notice required [] has been given.”18 In addition to these five factors, courts

3 4

§ 7-601(b)(2).

5

§ 7-602(b)(2).

6

See Att’y Grievance Com’n of Maryland v. Owrutsky, 322 Md. 334 (1991)(three-year suspension imposed for careless handling of an estate and withdrawal of funds without prior court approval). See also, Beyer v. Morgan State Univ.,

7 8 9

§ 7-602(b)(1).

14

§ 7-603(a).

Wolfe v. Turner, 267 Md. 646, 657-58 (1973).

Id. at 667 (2006)(citing Piper Rudnick v. Hartz, 386 Md. 201, 227 (2005)(analyzing and distinguishing 7-602 and 7-603)).

Riddleberger v. Goeller, 263 Md. 57-58 (1971).

10 Id.; Wolfe v Turner, 267 Md. at 658.

11 § 7-603 12 § 7-602 13 Banashak v. Wittstadt, 167 Md. App. 627, 667 (2006)(citing Piper Rudnick v. Hartz, 386 Md. 201, 227 (2005)(analyzing and distinguishing 7-602 and 7-603)).

15 § 7-603(b)(2).

16 § 7-603(b)(1).

17 Md. R. 6-416.

18

Md. R. 6-416(a)(1).

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Payment of commissions and fees may be made without court approval if certain conditions exist as set forth in 7-604.

traditionally consider the solvency of an estate in determining whether a petition for fees is reasonable. While not required, most petitions include a statement indicating that the estate is solvent.

It is good practice to attach an executed engagement letter and time sheets as exhibits to a petition for fees and commissions.

In addition to being verified, a petition for attorney’s fees and/or personal representative’s commissions shall be accompanied by notice in the form prescribed by Md. R. 6-416(3).

Exceptions to Petition Requirement: Payment of commissions and fees may be made without court approval if certain conditions exist as set forth in 7-604.

Specifically, a personal representative does not need to petition the court if: (1) the creditors of all open claims, if any, and all interested persons consent in writing; (2) the combined sum of the payments of commissions and fees do not exceed the amount provided for in 7-601; and (3) the signed written consent form states the amounts of the payments and is filed with the register of wills.19 Alternatively, a petition is not required for fees paid to an attorney representing the estate in litigation under a contingency fee agreement signed by the decedent or the current personal representative if: (1) the fee does not exceed the terms of the contingency fee agreement; (2) a copy of the contingency fee agreement is on file with the register of wills; and (3) “the attorney files a statement with each account stating that the scope of the representation by the attorney does not extend to administration of the estate.”20 If these requirements are not met, the contingency fee may still be paid upon court approval.

Determining Reasonableness of Fees: While the jurisdiction of our probate court is special and limited, orphans’ courts exercise broad discretion and must consider multiple interconnecting factors when deciding the reasonableness of fees sought. While Wolfe v. Turner clearly sets forth the standard elements to be considered when determining reasonableness of fees, probate judges must also consider Maryland’s Professional Code of Conduct.

Undisturbed for over 50 years, Wright v. Nuttle holds that the orphans’ court shall consider both counsel fees and commissions together to determine what is fair and reasonable.21 However, “the appropriateness of a counsel fee cannot be determined by simple arithmetic. This is an area where adherence to standards, and not reliance on mere numbers, must be the controlling factor.”22 In determining the reasonableness of fees requested by counsel to the personal representative, the court considers six factors: (1) the amount involved; (2) the character and extent of services; (3) the time employed; (4) the importance of the question; (5) the benefit to the estate, and (6) the customary charges for similar services.23 If the court shall allow a counsel fee to one or more attorneys, it shall take into consideration in making its determination what would be a fair and reasonable total charge for the cost of administering the estate [], and it shall not allow aggregate compensation in excess of that figure.”24 Finally, the Rules of Professional Conduct governing fees apply to the determination of reasonableness of attorney’s fees requested from an estate.25 Rule 1.5 of the Rules of Professional Conduct identifies eight nonexclusive factors for the court’s

19 § 7-604; see also Md. R. 6-416(b)(2).

20 § 7-604(2)(i)-(iv); see also Md. R. 6-416(b).

21 Id. at 701.

22 Banashak v. Wittstadt, 167 Md. App. 627, 661 (2006)(quoting Wolfe v. Turner, 267 Md. 646, 658-59 (1973)).

23 Wolfe v. Turner, 267 Md. 646, 653 (1973).

24 § 7-602(c).

25 Castruccio v. Castruccio, 247 Md. App. 1.; see also Md. R. 19-301.5.

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consideration: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment of the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.26 Importantly, the orphans’ court may not adjust attorney’s fees without first giving the estate an opportunity to address the court’s concerns.27

Conclusion: The orphans’ court has exclusive jurisdiction over commissions and fees, balancing statutory limits with discretion to determine reasonableness in light of many factors. While commissions are strictly capped by statute, the orphans’ court is vested with tremendous discretion when deciding a properly filed petition for fees.

____________ Ms. Fitch is a partner at Whiteford, Taylor and Preston where she co-chair’s the firm’s regional estates and trusts practice.

She served as an associate judge of the Orphans’ Court for Howard County from 2018-2022.

26 Md. R. 19-301.5; Est. of Castruccio v. Castruccio, 247 Md. App. 1 (2020).

27 Id.

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