One of the first questions that a potential inheritance litigation client quite reasonably asks is some form of the following question: “How much is this ultimately going to cost me?” While there is unfortunately little or no way of determining on the front end how much a legal matter might cost, how that cost will be calculated generally is capable of early determination. There are typically three primary ways in which an attorney charges for his or her services, and of course occasionally a couple of these methods can be combined together to create a “mixed” fee arrangement.
1. HOURLY FEE
As Abraham Lincoln famously said, "A lawyer's time and advice are his stock in trade." Accordingly, the most common fee arrangement is based upon an hourly fee, i.e., the lawyer charges an hourly rate for their time and the ultimate fee is determined upon how much time the lawyer has to spend on the representation. For example, if I was retained by the trustee of a trust to defend against claims brought by a beneficiary of the trust, I would charge the trustee an hourly fee and the ultimate bill would be determined upon how much time I had to spend working on the trustee’s case. The same goes for a beneficiary pursuing claims against the trustee.
Obviously, the more time-consuming the case the more expensive the representation (and vice versa). Hourly rates in Arkansas are by and large considerably lower than in other, more populated and wealthier areas of the country, especially the East and West Coasts. There are a number of factors which determine the hourly rate, including but not limited to the complexity of the area of law, the attorney’s experience and reputation, the attorney's location, etc.
2. CONTINGENCY FEE
A second, but less common, fee arrangement in inheritance disputes (and other litigation for that matter) is a “contingency fee.” This is an arrangement which is necessarily only used by the person bringing the lawsuit, as opposed to the person defending the action. Specifically, the lawyer and the client agree that the lawyer will accept a percentage of whatever amount is recovered (if anything) as the lawyer’s fee for the representation. A common percentage is anywhere from 25-50%, and rarely will the percentage stray outside of that range. Usually the lawyer and the client will come to an agreement on the front end regarding who will pay for the various costs (filing fees, deposition expenses, copies, postage, etc.) and sometimes the lawyer will advance those expenses and then take them “off the top” in the event of any recovery.
As one can tell, under this arrangement the more favorable the recovery, the higher the lawyer’s fee. However, there is also added risk for the attorney because if there is little or no recovery, or if the client prevails but the judgment is uncollectible as a practical matter (the defendant has no money, etc.), then the lawyer loses just like the client. Given the fact that litigation can often take years, essentially the attorney is working for free for a long period of time before recouping out-of-pocket expenses much less any fee for the work performed.
This type of arrangement can be beneficial in situations wherein an individual might not be able to afford an hourly arrangement. Again, the potential downside is that, unlike a rear-end collision wherein liability in a personal injury case might be very clear, liability in estate, trust, or probate litigation can often be quite unclear and unpredictable. Therefore, in cases where liability is unclear or in cases in which the defendant could potentially have counterclaims against the plaintiff, contingency fee arrangements will probably not be the ideal arrangement. Occasionally, a lawyer will be willing to combine a lower hourly fee (perhaps charging 2/3 of their regular hourly rate) with a lower-than-usual contingency percentage (perhaps 25% instead of 33% or more), therefore creating a mixed hourly/contingency fee arrangement.
3. FLAT FEE
Finally, the third and least common type of fee arrangement is simply a “flat fee” paid for a certain amount of services. In other words, the lawyer and the client agree that a certain type of service or a certain number of actions will be taken by the lawyer to represent the client (drafting a certain amount of letters, preparing an agreement, etc.). For that finite amount of services the lawyer and client agree on a specific fee. This gives both the lawyer and the client a greater degree of predictability, but it is an often impractical arrangement in estate, trust and probate disputes because litigation is unpredictable and can rarely be reduced to only a certain number of actions. However, in certain situations it can be used effectively and should not automatically be discarded.
In conclusion, the best fee arrangement in a particular situation will necessarily depend upon the facts and circumstances. While the free market has resulted in lawyers no doubt being expensive, when it comes to the amounts of money and high stakes involved in inheritance litigation, many times the lawyer’s fee can be a mere drop in the bucket. For example, if a plaintiff potentially goes without recovering some or all of a large inheritance that they were otherwise supposed to receive, then hiring an attorney can even be construed as a wise investment. Likewise, if a trustee could potentially be removed from her office or is wrongfully accused of harming the trust and causing substantial damages, hiring representation is a necessity rather than a luxury (incidentally, sometimes trustees' attorney fees can be paid out a trust or reimbursed by a trust). In certain situations (breach of contract, breach of trust, etc.) the prevailing party also may be able to recover some or all of their attorney’s fees expended. In essence, every situation is different and unfortunately there are simply no guarantees when it comes to the outcome of a legal matter nor the attorney fees necessary to handle that legal matter.
Matt House can be contacted by telephone at 501-372-6555, by e-mail at email@example.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.