Trustee Fees - The Superior Court's View

Is Williamson Estate still good law?

On August 24, 2009, the PA Superior Court filed its opinion in Wachovia Bank, N.A.'s appeal in The Estate of Anna Fridenberg .  See 2009 PA Super 164.

The case arose on Objections to the Account of Wachovia Bank, N,A, as the Trustee of a perpetual charitable trust.  Wachovia's corporate predecessor served as executor of the will of Anna Fridenberg and received commissions on principal for services as Executor.  The same corporate predecessor then served as trustee of the trust under the will.  The Attorney General of the Commonwealth objected to payments of Trustee's commissions on principal.

The Philadelphia Orphan's Court held for the objectant against Wachovia, N.A. because such payments are barred by decisions in the matters of Williamson Estate, 368 Pa. 343 (1951); Scott Estate, 418 Pa. 332 (1965); and, Ehret Estate, 427 Pa. 584 (1967). See the Court's opinion here. The Orphan's Court held that it would be unconstitutional under the Fourteenth Amendment of the United States Constitution, to apply retroactively any statute which repeals the prohibition on the same individual receiving commissions on principal as both executor and trustee, which prohibition existed under the 1917 Act.  The Orphan's Court held that former Section 7185 (b) of the PEF Code, as amended by the Act of February 18, 1982, P.L. 45, No. 26, and, Section 7768 of the Uniform Trust Act, as enacted by the Act of July 7, 2006, P.L. 625, No. 98, may not be applied retroactively to permit the challenged payments of Trustee's commissions on principal.

The Orphans’ Court rejected the argument that case law had been superseded by the numerous legislative amendments, concluding: “The Legislature could not do in 1982 and 2006 what it was constitutionally prohibited from doing in 1945 and 1953.”

The Superior Court reversed the Philadelphia Orphan's Court.   See their opinion here. 

Justice Klein filed a dissent where he says:  

"Although I agree that the majority’s outcome is both logical and preferable in light of the duties required of a trustee/executor, I cannot agree that In re Ehret’s Estate , 235 A.2d 414 (Pa. 1967), has effectively rendered   In re Williamson’s Estate, 82 A.2d 49 (Pa. 1951), and In re Scott’s Estate, 211 A.2d 429 (Pa. 1965), obsolete. Therefore, I believe that our Supreme Court’s rule is still in effect. If a person or entity took a principal commission as executor dual commissions, that person or entity is barred from taking a principal fee from the trust although the rule changed before the fee against the trust principal was claimed. "

Stay tuned.  If this case is appealed, as many Superior Court fiduciary law decisions are, we predict that the PA Supreme Court will adopt the position of the dissenting Justice Klein.  Many fiduciary law cases have to go the extra mile to the Supreme Court.

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Probate Lawyers Go To Jail?

You gotta see this:

Juan Antunez's post on the Florida Probate & Trust Litigation Blog --

Probate lawyers arrested for representing client disinherited by Georgia's Slayer Statute.

Antunez writes:  "When it comes to staying out of trouble, spotting your risk exposures is half the battle (it's the "unknown unknowns" that will get you).  The Georgia case gives probate attorneys something else to worry about (as if we didn't have enough already). If your fees could in any way be characterized as tainted by criminal conduct, you need to assume the worst and take appropriate precautions.  As the Georgia lawyers learned, just because you're the friendly neighborhood probate attorney (and not some high profile criminal defense attorney), doesn't mean you can't get put in jail for doing your job."

Here is Professor Gerry Beyer's summary of what happened posted on Wills, Trust & Estates Prof Blog:

  • Debra Post allegedly murdered her husband, Jerry Post, in 2002.
  • Debra hired Candice Rader and Valerie Cooke to defend her.
  • As payment for their services, Candice and Valerie accepted assets valued at over $320,000 from Debra to which Debra was not entitled because of the slayer statute (that is, proceeds of Jerry's life insurance and some real property).
  • Subsequently, Debra pled guilty to felony murder and was sentenced to life without parole.
  • A Douglas County Georgia grand jury indicted Candice and Valerie on August 21, 2008 for knowingly taking assets which were "covered" by the slayer statute.
  • The attorneys were arrested

Under Georgia's "Slayer's Statute," a murderer isn't entitled to profit from his or her victim's estate.  Since the attorney's were paid from the victim's estate, they, well, what did they do?  They were charged with  six counts of theft by taking and one count of theft by receiving.  They were taken to jail after their arrest and released the next day on $100,000 bond each (according to the Atlanta-Journal Constitution).

Were they really probate lawyers?   Or were they criminal defense lawyers?    What's the difference between. . . . . . .

$$$ Excessive Commissions and Fees $$$

Both Attorney's fees and Executor's commissions were reduced in Janiga Estate (O.C. Div. Phila.) 28 Fiduc. Rep. 2d 219, opinion by Judge Herron.

Decedent left an estate valued at $1,024,425.21 and a  will that devised two parcels of real estate to the Executrix, made some specific bequests, and divided the residue between two charities.

The Attorney General of the Commonwealth of Pennsylvania, as parens patriae, filed ten objections to the account and a hearing was scheduled. At that hearing, the Attorney General stated that various objections had been resolved, except for the objections that the executrix commission of $34,000, the attorney fee of $45,000( the Account incorrectly listed attorney fees as $40,000, but during the hearing it was disclosed that attorney fees had actually totaled $45,000) and the accountant fee of $31,000 were  unreasonable and excessive based on the nature of this estate.

(Here is the math:  That's a total of $110,000 in fees -  a whopping 10.73% in an estate whose assets apparently consisted of a house, tangible personal property and bonds.)

The Attorney General claimed that the bulk of estate administration was completed by October 2004 (which consisted of the Executrix distributing property to herself and family members)  but due to the neglect of the executrix and estate counsel, distribution was not made to the charities until 2006.

The AG also asserted the the executrix failed to monitor the legal and accounting fees billed to the estate.

The court said:  "While a schedule for computing fiduciary and attorney fees was set forth in Johnson Estate, 4 Fid. Rep. 2d 6 (Mont. City. 1983) based on percentages related to the size and nature of estate assets, the Pennsylvania Superior Court has more recently emphasized that “[e]gregious error is committed when a court awards commissions and fees simply on a percentage basis without inquiry into the reasonableness of the compensation.” In re Preston, 385 Pa. Super. 48, 57, 560 A.2d 160, 165 (1985). A methodology for determining attorney fees has been set forth by the Pennsylvania Supreme Court in LaRocca Estate, 431 Pa. 541, 546, 246 A.2d 337, 339 1968).

Held:  "On this record, therefore, the payment of $45,000 in attorney fees was unreasonable. It will
therefore be reduced by half to $22,500. The executrix will therefore be surcharged in the amount
of $22,500 for that excessive payment and her claimed commission of $34,000 will likewise be
reduced by half to $ 17,000. Consequently, the surcharge that she must return to the estate is
$39,500. A crucial factual consideration in reducing these fees and surcharging the executrix is that the beneficiaries whose interests were neglected were charities. . . ."

Thank you to the July 2008 edition of Fiduciary Review which reported on the Janiga EstateFiduciary Review is edited by J. Brooke Aker, Richard L. Grossman, James L. Hollinger and Frances A. Thomson, 60 East Penn Street, Norristown PA 19404