Making Probate Profitable

How engaging a professional fiduciary can reduce attorney workload and increase profitability

In Los Angeles County deaths are on the rise. There will be a corresponding rise in the number of probate cases filed in the Los Angeles Superior Court. Even though trusts have become the most common testamentary instrument, there are still a very large number of probate filings. Despite this growing opportunity, many lawyers avoid probate because of its perceived complexity, the long delay in compensation and the sheer amount of work required. As a result, except for the larger estates, most probates tend to be unprofitable.

Problem: Two Jobs, One Fee

The California Probate Code limits the probate attorney to a single fee. Unfortunately, there are no corresponding limits on the amount of work the attorney does for that fee. In practice, practitioners realize that they must do not only all of the legal work but a huge part of the administrator’s job as well. Because no one gets paid until the estate is closed, the attorney has little choice but to keep doing the client’s job until it is finished. As a result, the attorney often ends up doing two jobs but can only charge one fee. This wreaks havoc on profitability.

Real Problem: Probate and Trust Administration is Complex

The real underlying problem is that the proper administration of a trust or probate estate is complex and tedious. Very few administrators have the skill, time and experience they need to successfully administer an estate. This is why
everything ends up on the attorney or paralegal’s desk. It would be one thing if the matter could be managed directly by the attorney and paralegal staff. Unfortunately, the client is the only one who can act or sign documents. Thus, the law office must not only do the client’s work, they have to work around the client’s schedule at the same time.

Worse yet, the questions never stop. The attorney or paralegal not only has to do the client’s job, they have to explain—often in vain—why something must be done a certain way. Let’s not forget the client’s failure to track expenses and manage the bank account. It’s exhausting and it drains the profit out of the average probate.

For example, an $850,000 estate that includes real estate, personal property, cash and investments will produce a gross attorney fee of exactly $20,000. Industry wide, the average overhead factor in law offices is 50%. This includes rent, staff, utilities, insurance, etc. On paper this probate will generate a gross profit before taxes of $10,000. The problem, of course, is that in a probate case, the attorney fee is capped but the amount of work required to get that fee is not. As a result, every time the attorney has to do the client’s job, the engagement automatically becomes less profitable. As the cost of producing that fee increases, the profit drops like a rock. Put another way, if an attorney does all the legal work in a probate plus half of the administrator’s job, the engagement is only half as profitable. In this illustration, therefore, the attorney leaves $5,000 on the table that cannot be recovered.

Real Cost is the Opportunity Cost

In reality, the attorney loses more than $5,000. The fact is that the additional attorney and paralegal resources could have been redeployed on another case. In other words, being tied down doing the client’s job on one probate not only resulted in an unnecessary $5,000 reduction in profitability, it also resulted in a lost opportunity to generate a $10,000 profit on another matter. In economics, this is known as an “opportunity cost. Thus, hiring a professional fiduciary not only restores $5,000 in profit, it helps to generate another $5-10,000 in profit on another matter. In short, hiring a professional fiduciary can double or even triple a law firm’s profitability in probate cases.

Solution: Hire a Professional Fiduciary

No matter the client’s education or experience, the particular probate proceeding they are involved in will be their first and last. Thus, the attorney is always starting over again with each new administrator. Fortunately, the solution is simple and straightforward: Engage a professional fiduciary to take over the client’s job.

How We Work

Once engaged, Private Trust Management Group assigns one of its professional fiduciaries to the case. Where possible, we recommend that the professional fiduciary actually replace the administrator by motion. In most cases, however, the administrator merely appoints the professional fiduciary as agent under a power of attorney and we take it from there. Our office becomes the place of administration of the estate. All correspondence and telephone calls dealing with creditors, heirs and beneficiaries are directed to our office. The attorney, of course, continues to do all of the legal work, reviews and prepares all documents and is kept constantly apprised of the progress of administration. Our firm marshalls the assets of the estate, identifies and pays the creditors, deals with the family, manages the bank accounts, manages the sale of real property, ensures the filing of tax returns, prepares all accountings including the draft final court accountings and ensures final distribution. In other words, we handle the case from beginning to end. Very simply, we do everything that the administrator is supposed to do.

How We Charge

Our fee arrangements are simple. There is no up-front retainer. We take an assignment of the administrator’s fees and get paid when everyone else gets paid. A copy of the agreement is filed with the court. Any request for extraordinary fees is filed with the court and is subject to the court’s determination and approval. You and your client are never at risk for our fees.

How to Get Started

Call our offices and we will schedule a meeting at no charge in your office or ours. Once we get to know each other and it seems like a good fit, we can finalize the paperwork and get started. It’s that simple. With a professional fiduciary now in charge of the administration of the estate you can get back to the profitable practice of law!