Let’s face it, lawyers have bad reputations, including being greedy opportunists, lazy, driving sports cars, and not really caring about their clients’ needs. I think part of that has to do with the surrounding circumstances—almost always bad—when it comes to hiring a lawyer. But our not so good reputations also come from not properly setting our clients expectations regarding the true cost of litigation.
I see clients who complain about another law firm or lawyer who has handled their case up to the time they’ve come to see me. The clients complain that the lawyer told them it would cost $2,500 to $5,000 to get the Trust or Will Contest taken care of. As far as the client knew they had to come up with, at most, $5,000, and the Trust or Will contest would “be taken care of.” But what the law firm or attorney neglected (hopefully accidentally) to tell these clients was the “true” financial cost of a typical Trust or Will Contest. Well, I’m going to do that now.
But before I give you the answer for the true costs of Trust and Will litigation I want to talk about the primary financial arrangements that clients can make with attorneys in these types of matters. As a general rule, you can hire most attorneys on an hourly basis or a contingency fee basis. If on an hourly basis the client pays the attorney for every hour the attorney spends working on the case. For example, if the attorney is $300 per hour and works for 3 hours on the case, the bill would be $900. On the other hand, some clients prefer a contingency fee agreement where the client agrees up front to give the attorney a percentage—usually 40 percent—of the recovery in the case. For example, the attorney would receive $40,000 in attorney’s fees if they obtain a settlement or verdict for the client in the amount of $100,000; the client would get the balance—around $60,000.
Okay, so which is the better choice for Bay Area Trust and Will litigation matters? An hourly agreement? Or a contingency fee agreement? Before I give you my opinion on that, here’s what it takes to win the typical Trust or Will Contest:
- $3000: 10 hours of attorney time to review the Trust, Amendments, Last Wills, Durable Powers of Attorney, and any other Estate Planning Documents; review of applicable statutory and case specific California law as it relates to Trust and Will Contests with similar facts as the case.
- $600: 2 hours of attorney time to meet with the client to review facts of the case with the client.
- $900: 3 hours of attorney time to review beneficiary information, background checks, talk to potential witnesses, etc.
- $500: initial filing fee for the Trust or Will Contest. (Most Probate Courts are a bit less than $500, but that’s a good number for the required fees at initial filing)
- $600: Lawyer appearance at the first hearing on the Trust or Will Contest.
- $3000: 10 hours of attorney time to prepare the first set of written discovery.
- $3000: Notice, prepare, and attend a single oral deposition in the case.
- $3000: 10 hours of attorney time to prepare discovery responses to the opposing party’s written discovery.
- $3000: Prepare client and attend client’s single oral deposition in the case.
- $3000: Subpoena the decedent’s medical records.
- $15,000: Hire an expert forensic psychiatrist to review all available medical records and all depositions taken in the case.
Is my point being made? If not, let me say it clearly—litigation is very expensive. And this is the first conversation I have with a client when they come in to hire my firm. I want to make sure the client’s expectations are set on the true cost of litigating Trust and Will matters in the Bay Area.
Okay, now that I’ve established that litigating these important cases is not cheap, back to my original question. Which is better? An hourly agreement? Or a contingency fee agreement? The answer is: Both! How is that possible? Well, in my opinion the best agreement is fair to both the client and the law firm. How can this be arranged? Easy. The client agrees to pay hourly up to a certain maximum, i.e., $10,000. Some clients will do less, say $5,000, and some clients will do more, say $20,000. Whatever it is, that’s how much the client is willing to pay for the entire lawsuit. But wait, what happens when the client runs out of the initial $10,000? Then the case converts to a contingency fee case.
How does this hybrid hourly/contingency fee agreement fair to both the client and the attorney? Let’s take a look at two examples of case outcomes. Let’s assume that each of the cases settles or gets a verdict for $100,000 and $10,000 is paid up front by the client in the hybrid fee agreement.
What happens if the case settles quickly after two letters from the attorney, which let’s say took two hours for the attorney to write. Under the hourly agreement the attorney would get $600 for two hours time, and the client would get $100,000. Under a contingency fee agreement, the lawyer would get 40 percent of the recovery for two hours worth of work, or $40,000 (that’s a pretty good hourly rate), and the client would get $60,000 (not so good for the client). Under the hybrid fee agreement the attorney would get $600 for two hours of work and the client would get $100,000. It doesn’t take a rocket scientist to see the hybrid fee agreement is the fairest option for the client and most likely the attorney as well (although $40,000 to the attorney is better than $600). Let’s hope you found a good attorney that truly wants to help you. If that’s the case, then that attorney will be happy with the hybrid agreement as well.
What happens if the case requires 200 hours of lawyer time to get all the way to trial? Under the hourly agreement the attorney would get $60,000 ($300 per hour x 200 hours) and the client would get $40,000–no matter if the lawyer wins or loses. Under a contingency fee agreement, the lawyer would get $40,000 (40% x $100,000 verdict) and the client would get $60,000, assuming the lawyer wins the case. Under the hybrid hourly/contingency fee agreement the attorney would get $10,000 for the initial hourly payment by the client, and then $40,000 (40% of $100,000 verdict) and the client would get $50,000, assuming the lawyer wins the case. Again, it doesn’t take a brainiac to determine the fairest option here–the hybrid fee agreement.
Each of these examples shows that the client and the lawyer can be happy with the hybrid agreement because it treats everyone fairly.
Shakespeare was probably correct when he said “The first thing we do, let’s kill all the lawyers”. But until we come up with an easier way to resolve Trust, Probate and Estate matters, we will—unfortunately—still need lawyers. But it will be easier if clients understand the “true” financial costs of Trust or Will litigation before hiring the law firm or lawyer.