State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
The executor of an estate, acting in his representative capacity, employs an attorney to perform legal services for the estate. The executor also transfers some or all of his duties as executor to the attorney and pays the attorney for those services. Is it ethical for the attorney to receive from the estate the statutory fee for legal services and to receive from the executor compensation for the performance of the executor's duties?
The attorney may receive payment from the executor personally and the statutory fee from the estate providing the estate is not making double payment, the attorney obtains the executor's informed written consent, complies with rule 3-300 of the California Rules of Professional Conduct and obtains court approval.
Rule 3-300 of the California Rules of Professional Conduct of the State Bar.
Business and Professions Code section 6148.
The legal fees paid to attorneys for conducting ordinary probate proceedings are payable from the estate1 and are governed exclusively by statute. The Probate Code sets forth the amount and method of compensation and requires court approval before payment. (Prob. Code, §§ 10800-10832.)
The executor is entitled to receive a commission for services rendered to the estate and his commission is also governed exclusively by statute. (Prob. Code, §§ 10800-10805.)
An attorney who serves as both attorney for and executor of an estate may not receive compensation for legal services rendered to the estate. (Estate of Parker (1926) 200 Cal. 132, 135-136.)2 This rule is grounded in public policy in order to preclude the conflict of interest that would inevitably arise when the executor-attorney employs himself to perform legal services for the estate.3
[N]o one who has a duty to perform shall place himself in a situation to have his interests conflicting with that duty; and a case for the application of the rule is that of a trustee himself doing acts which he might employ others to perform, and taking payment in some way for doing them. As the trustee might make the payment to others, this Court says he shall not make it to himself; and it says the same in the case of agents, where they may employ others under them . . . . The result therefore is, that no person in whom fiduciary duties are vested shall make a profit of them by employing himself, because in doing this he cannot perform one part of his trust, namely, that of seeing that no improper charges are made. (Id. at pp. 136-137.)
It is not uncommon for lay executors to seek the advice of an attorney in handling the administration of the estate. Where the executor wishes to hire an attorney to perform the executor's duties, he must compensate the attorney from his personal funds.4 The attorney may not receive payment for said services from the estate since otherwise the estate would be made to pay twice for the same service. (Estate of Brignole (1901) 133 Cal. 162, 164.)
Before the attorney may ethically receive payment from the executor for the performance of the executor's duties, the attorney must comply with Business and Professions Code section 6148 and rule 3-300 of the California Rules of Professional Conduct.5 Thus, the agreement between the attorney and the executor must be in writing and where the attorney anticipates that the legal fees will exceed $1,000 he must comply with Business and Professions Code section 6148.6 In complying with rule 3-300 of the California Rules of Professional Conduct the attorney must ensure that the terms of the representation are fair and reasonable and that the client provides informed written consent.7 Finally, the attorney may be required to fully disclose the terms of the agreement to the court8 and obtain court approval before receiving compensation. The attorney's failure to make disclosure to the court may not only risk his entitlement to compensation, it may also subject the attorney to discipline. (Bus. & Prof. Code, §§ 6068 (d) and 6128; rules 5-200(A) and 5-200(B), Rules Prof. Conduct of State Bar.)
The attorney must be careful not to exploit his role if he is compensated for performing the executor's duties. Attorneys commonly assist and supervise executors in the performance of their duties without requiring additional compensation. While it is difficult to envisage the probate court approving compensation which would exceed the commission to be received by the executor, the attorney should consider limiting his fee so that it cannot exceed the executor's commission.
The executor is required to use ordinary care and diligence in managing and controlling the estate and its assets. (Prob. Code, § 9600 (a).)9 While the attorney for the executor ordinarily owes no fiduciary duties to beneficiaries, heirs or claimants of the estate10 (see Goldberg v. Frye (1990) 217 Cal.App.3d 1258, 1267 [266 Cal.Rptr. 483]; see also ante, fn. 1), the executor owes fiduciary duties to all parties interested in the estate (see also Estate of Sanders (1985) 40 Cal.3d 607, 616 [221 Cal.Rptr. 432]); Estate of Beach (1975) 15 Cal.3d 623, 631 [125 Cal.Rptr. 570; 542 P.2d 994].)11 The attorney must be careful to avoid participating in any breach of fiduciary duty by the executor since this may expose him to liability for the same breach.12
Where the attorney assumes the duties of the executor an argument can be made that he thereby assumes the executor's fiduciary duties to parties interested in the estate, including estate beneficiaries. While this Committee cannot opine on the legal ramifications of the delegation of duties from executor to attorney, the attorney must be careful to avoid any potential conflict of interest or the breach of fiduciary duties.13
The fact that the executor may have delegated some or all of his responsibilities to the attorney does not relieve the executor of his responsibilities to the estate. The executor's duties are non-delegable in the sense that the executor retains responsibility for their proper execution and he may be surcharged by the probate court for any negligence or malfeasance.14
An attorney is not precluded from acting as attorney-executor of an estate if he foregoes payment for his role as attorney. Similarly, an attorney is not precluded from performing and receiving compensation for specific tasks properly the responsibility of the executor. However, the attorney must be mindful of rule 3-300 of the California Rules of Professional Conduct, the potential conflict of interest which might adversely affect his duties to the executor and the possibility that the attorney may assume fiduciary duties to parties interested in the estate.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of the State Bar of California. It is advisory only. It is not binding upon the courts, the State Bar of California, its Board of Governors, any person or tribunals charged with regulatory responsibilities, or any member of the State Bar.
(a) In any case . . . in which it is reasonably foreseeable that total expense to a client, including attorney fees will exceed one thousand dollars ($1,000), the contract for services in the case shall be in writing and shall contain all of the following:
(1) The hourly rate and other standard rates, fees, and charges applicable to the case.
(2) The general nature of the legal services to be provided to the client.
(3) The respective responsibilities of the attorney and the client as to the performance of the contract.
A member shall not enter into a business transaction with a client; knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client, unless each of the following requirements has been satisfied:
(A) The transaction or acquisition and its terms are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which should reasonably have been understood by the client; and
(B) The client is advised in writing that the client may seek the advice of an independent lawyer of the client's choice and is given a reasonable opportunity to seek that advice; and
(C) The client thereafter consents in writing to the terms of the transaction or the terms of the acquisition.
. . . respondents are accused of active participation in breaches of fiduciary duty by the former trustees. More than the simple rendering of legal advice to respondents' clients is alleged. More than the mere knowledge of the breach of fiduciary duty are alleged. Active concealment, misrepresentations to the court, and self dealing for personal financial gain are described. We find that this is sufficient to state a cause or action for breach of fiduciary duty . . . . (Id. at p. 1106.)