Care Necessary in Calculating Attorney’s Fees in Probate Matters

August 26, 2009 | Erin Herbold

 

The Iowa Code specifies the maximum amount of “ordinary” fees that can be paid to an attorney for the administration of an estate (Iowa Code §§ 633.197 and 633.198). The law requires that the attorney be allowed “such reasonable fees as may be determined by the court, for services rendered.”  In addition, the fees must not exceed the rate set out in the Iowa Code which corresponds to the “gross assets of the estate listed in the probate inventory.”

Note: The probate inventory includes a list of the decedent’s property at the time of death and all other items of value, which are subject to the Iowa inheritance tax or federal estate tax. Thus, deeds, gifts, sales, or transfers made or intended to take effect after the death of the grantor are included in that calculation (Iowa Code §450.3(3)).

Here, in an attempt to qualify for Medicaid payments to cover her long-term care expenses, the decedent, in 2004, deeded real estate to her children equally, while reserving the right to the unqualified use of the property for her life.  Upon her intestate death in 2007, the Iowa Department of Human Services (DHS) filed a claim against her estate for the amount it reimbursed her health care providers for long-term care. Iowa Code § 249A.5(2)(c) specifies that DHS has a right to collect the debt from the estate, including any “retained life earnings.” When the administrators of her state submitted the final report and inventory, there were not enough funds to cover DHS recovery after the payment of other estate obligations, such as attorney’s fees. In Iowa, “costs of administration” must be paid before any debt for medical assistance. 

So, the issue was how the value the “gross assets of the estate” was to be determined, and whether the value of a retained life estate should be included in the gross estate for purposes of computing probate fees. The administrators of the estate (the decedent’s children) argued that the remainder interest should have been included in the valuation of the gross estate for purposes of computing probate fees.  The trial court disagreed, stating that the remainder interest should be excluded. 

The administrators appealed and the Iowa Court of Appeals reversed the trial court, stating that the “entire value of real property,” including the value of any retained life estate should be included in the probate inventory. Here, the entire value of the property had been reserved to the decedent during her life. She was the only person entitled to use and enjoy the property, thus, that interest was properly included in the decedent's estate for purposes of computing the probate fee.  In re Estate of Jones, No. 9-549/08-1961 (Iowa Ct. App., Aug. 6, 2009)