Thrills With Wills – Attorney Fees and Family Squabbles (Iowa)

In Iowa, estate administration is a relatively streamlined, inexpensive process.  For most estates, the attorney fee is generally a routine two percent of the gross estate.  In many instances, that may be less than the cost associated with the funeral.  But, the attorney fee can be more if the family wants to fight.  This case illustrates that point.

The decedent died in 2005 and the primary asset of the estate was the decedent’s home.  A daughter was appointed executor, and she hired an attorney to handle the estate’s administration.  Eventually, the house was listed for sale and the executor’s son offered the most ($109,000) for the house and the estate accepted the offer.  Later, an unrelated party offered a higher price for the home, but the estate took no action.  When the executor’s son was unable to obtain financing for the home, because the offering price was higher than the appraisal, some of the heirs agreed to sell the house to the executor’s son at the appraised value of $107,000. 

However, another daughter of the testator objected to the sale, ultimately preventing it and the home was eventually sold to an unrelated party for $104,000.  After the money was deposited into the client’s trust account, the attorney and executor filed a motion for ordinary estate administration fees and the court approved those fees.  The daughter who objected to the home sale filed an appeal objecting to the dispersal of attorney’s fees, claiming that the proceeds from the sale of the home should not have been deposited into a noninterest-bearing account.

The executor and attorney filed an application for extraordinary fees and claiming that the other daughter caused the failure of the first sale and loss of funds to the other heirs.  The trial court granted the application, and the extraordinary fees were deducted from the objecting sister’s portion of the estate. 

The objecting sister appealed, claiming that:  (1) the court erred in awarding extraordinary fees; (2) the executor delayed the sale of the home; and (3) the proceeds should have been deposited in an interest-bearing account.  The court found that the executor never delayed the sale to the detriment of the estate and her son’s offer was the best offer at the time.  The objecting sister was the only heir who did not support the price.  Further, the funds were appropriately held in the lawyer’s client trust account.  The lawyer and executor had the authority to place the funds in an interest-bearing account and they did subsequently deposit the funds into an interest-bearing certificate of deposit. 

Perhaps, the most important issue for the court was an examination of the award of extraordinary fees.  Iowa law allows for the order of extraordinary fees for services in connection with real estate and litigated matters.  The executor and attorney incurred additional expenses in connection with the objecting sister’s untimely appeal.  Even though the potential buyer of the home was the executor’s son, the executor acted in good faith and in the best interests of the estate.  The attorney was also acting in good faith in defending the estate from frivolous litigation. 

The court also allowed that the extraordinary fees were appropriately taken out of the objecting sister’s portion of the estate, since she filed frivolous motions and appeals.  The objecting sister was put on notice by the courts that this was a possibility.  Therefore, the sister’s portion of the estate was reduced.  In re Estate of Nielsen, No. 8-772/07-2163 (Iowa Ct. App., Oct. 29, 2008).