One of the most frequent questions asked by clients in the context of probate and trust administration cases is,
(Followed next by, How Long Will It Take?)
The answer to these questions is, it will cost a whole lot less than the $25 million dollars discussed in a case that was recently litigated before Florida’s Second District Court of Appeals. The lesson for all of us is simple….make sure your intentions are clear and that you properly manage your estate affairs BEFORE you hire an attorney.
Beyond that advice, read the facts from this mind-blowing opinion:
The Robert Rauschenberg Foundation, as sole remainder beneficiary of the Robert Rauschenberg Revocable Trust, seeks review of an order awarding $24,600,000 to trustees Bennet Grutman, Bill Goldston, and Darryl Pottorf for their services. We affirm the award in its entirety. We write only to explain why the trial court correctly refused to calculate fees using the lodestar method.
This case stems from the administration of the considerable estate of iconic and prolific artist and philanthropist Robert Rauschenberg. Rauschenberg devised his residuary estate to the Trust, and the Trust’s sole remainder beneficiary was the Foundation. The Trustees managed the Trust assets for several years after Rauschenberg’s death while its assets were being transferred to the Foundation. During this time period, the value of the Trust assets increased from $605,645,595 to $2,179,000,000.
The Trust does not contain a provision addressing trustee’s fees, and the major disagreement between the parties was the methodology to be used to calculate the fees. The Trustees requested between $51,000,000 and $55,000,000 in fees based on the factors set forth in West Coast Hospital Ass’n v. Florida National Bank of Jacksonville, 100 So. 2d 807 (Fla. 1958). The Foundation asserted that the Trustees were only entitled to $375,000 in fees based on the lodestar method set forth in Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985), modified, Standard Guaranty Insurance Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990). Both parties presented expert testimony applying their methodology.
In West Coast, the Florida Supreme Court addressed the calculation of trustee’s fees in a case in which the testamentary trust did not contain a provision specifying compensation. 100 So. 2d 807. The trial court had awarded annual trustee’s fees payable to the corporate and individual trustees based on a percentage of the trust principal and income. Id. at 810. The supreme court rejected this percentage approach and approved a standard under which the court would consider several factors to determine “reasonable compensation.”
Almost thirty years later, the supreme court issued Rowe to establish “objectivity and uniformity in court-determined reasonable attorney fees” by adopting the lodestar method. 472 So. 2d at 1149 (emphasis added). The court calculated the lodestar figure by multiplying the number of hours reasonably expended by a reasonable hourly rate. Id. at 1151. In determining the reasonable number of hours and reasonable hourly rate, the court considered factors similar to the West Coast factors. Id. at 1150-51.
The supreme court subsequently applied the lodestar method from Rowe in a case involving “reasonable compensation” for attorneys and personal representatives in probate actions. See In re Estate of Platt, 586 So. 2d 328, 336 (Fla. 1991), superseded by statute, ch. 93-257, § 4, at 2503, Laws of Fla. In rejecting attorney’s fees based on a percentage of the estate, the court looked to the legislative history of the statute and determined that the lodestar method was more consistent with that intent. Id. at 331-36. The court emphasized the legislature’s use of the word “reasonable” to determine the scope of fees. Id. at 335-36. The court concluded that it would not be “reasonable” to “allow one judge to set reasonable fees in an estate proceeding solely on the basis of a percentage value of the estate, a second judge to set attorney’s fees in a similar estate proceeding based on the lodestar method, and a third judge to set attorney’s fees in a similar estate proceeding by using a combination of both.” Id. at 336.
Approximately fifteen years after Platt issued, the Florida Legislature enacted a trustee fee statute that similarly provides for an award of trustee’s fees that are “reasonable under the circumstances” when the trust does not specify compensation. See § 736.0708(1), Fla. Stat. (2007). The statute does not set forth a methodology for calculating “reasonable” trustee’s fees or otherwise explain which “circumstances” should be considered.
The Foundation argues that the use of the term “reasonable” in section 736.0708(1) without further elucidation suggests a legislative intent to adopt the lodestar method set forth in Rowe. The Foundation asserts that the lodestar method, which the Rowe court applied to calculate attorney’s fees, is equally applicable to trustee’s fees.
The Foundation points to the supreme court’s application of the lodestar method in Platt to “reasonable compensation” for attorneys and personal representatives in probate actions.
Check out our YouTube Channel for more videos On Probate, Will Trust & Estate Planning