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A Case Lesson in “What Not To Do” When Billing as a Conservator

May 1 2019

 

by Daniel C. Kim
Trust and Estates Blog

Based on recent appellate cases, one of which is discussed below, the court’s scrutiny of conservators’ conduct and, specifically, private fiduciaries, is seemingly on the rise. Private fiduciaries acting as conservators should always remain focused on performing and charging only for those services that are consistent with the best interests of their conservatees. California case law continues to refine that understanding.

In the recent case of the Conservatorship of Presha, the Court analyzed one professional fiduciary’s fee request of $12,621.60. If any of you thought that a relatively low amount of a fee request could help avoid intense court scrutiny, think again. The court in Presha went to great lengths to shave off just over $5,000 from the fiduciary’s request, ultimately landing at $700 per month – a somewhat arbitrary “reasonable” number – for a total of $7,000 in approved fees.

By way of background and as many already know, private professional fiduciaries are entitled to “just and reasonable” fees for the services they provide for a conservatee. Either the services must actually benefit the conservatee or the fiduciary must have a good faith and objectively reasonable belief that they will benefit the conservatee. Fees are usually paid from the conservatorship estate only after court approval under the Probate Code. As a general guideline, the California Rules of Court Rule 7.756 sets forth the factors that the court will consider in determining what is “just and reasonable” compensation:

(1)The size and nature of the conservatee’s or ward’s estate;

(2)The benefit to the conservatee or ward, or his or her estate, of the conservator’s or guardian’s services;

(3)The necessity for the services performed;

(4)The conservatee’s or ward’s anticipated future needs and income;

(5)The time spent by the conservator or guardian in the performance of services;

(6)Whether the services performed were routine or required more than ordinary skill or judgment;

(7)Any unusual skill, expertise, or experience brought to the performance of services;

(8)The conservator’s or guardian’s estimate of the value of the services performed; and

(9)The compensation customarily allowed by the court in the community where the court is located for the management of conservatorships or guardianships of similar size and complexity.

In the case of the Conservatorship of Presha, Christine Davidson was the court-appointed conservator of the person and estate of Lorraine Presha from 2009 to 2015. Ms. Presha died in March 2015. In June 2015, Ms. Davidson filed a combined petition for approval of the sixth and final accounting and for conservator’s fees in the amount of $12,621.60. The court took issue with many of Ms. Davidson’s billing entries and was concerned about the duplication of entries and charging different clients for the same actions. That concern ultimately led the Court to, on its own, investigating into 15 other concluded matters in which Ms. Davidson had sought fees, essentially to evaluate the extent of her double billing and other inappropriate billing practices.

During one of the hearings, the court gave one example of a questionable entry that read: “Received, reviewed, and filed. Notice of changes from Security Bank, re in form of changes in bank fees, terms, and effective date.” In response, the court commented:

“the Court doesn’t want to be petty or feel petty, but we all get that little slip of paper once in a while from the bank that says, ‘We have exciting new changes to the terms of your account.’ And then you look at it and what they have done is increased the punishment for a bounced check from $20 to $22. We all glance at those papers and we throw them away. Why this estate has to pay $12 for glancing at that and throwing it away is a big question.”

During the same hearing, the court went on to question:

  • Why fees were being charged for confirming that a bank statement went to the correct mailing address when it was clear Ms. Davidson received the bank statement herself;
  • Why Ms. Davidson charged for meeting with a financial advisor to discuss how laws related to the “Affordable Care Act” taxes would affect her clients and whether the charge appears in 30 or a 100 clients’ billings.
  • Whether Davidson’s charge for 24 minutes to take a check to the bank was legitimately billed – “Is that the only check she took to the bank? Or did she take a hundred checks from a hundred clients? In which case, it was four hours billed if you add them all up, and did it take four hours to go to the bank. Or did she do the foolishness of taking this [one] check.”

In the court’s examination of 15 other matters in which Ms. Davidson provided services, the court notes further questionable billing practices. For example, the court found that on one particular day, eight disabled clients in eight separate cases were each billed two-tenths of an hour for receiving telephone calls from the bank – Was this all billing for the same phone call? The court also pointed to a similar example where eight clients were billed for a total of 3.6 hours of meeting with a bank manager on the same day. The list went on.

Despite Ms. Davidson’s arguments to the contrary, on appeal, the court found that the trial court’s scrutiny, in particular, the investigation into 15 other matters, was proper. It held that because Ms. Presha’s estate was being potentially abused by an agent of the probate court (Ms. Davidson), it was precisely the type of case where it could invoke its broad powers under the Probate Code to regulate and control the discharge of Ms. Davidson’s duties. The appellate court affirmed that the trial court had the ability to investigate the propriety of the conservator’s billing practices and affirmed the judgment for reduced fees in the amount of $7,000.

The case is certainly a cautionary tale for private fiduciaries and worth a read for those who want to see more of the specific types of questionable practices that concerned one judge enough to investigate further. It may be prudent to re-evaluate one’s billing and filing practices to ensure that duplicative billing practices are avoided and that the best interests of conservatees is always in mind while performing and billing for services.

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For more writing on estate planning, probate & trust administration, and estate & gift taxation, as well as trust, probate, conservatorship and elder abuse litigation, visit the Trusts and Estates Law Blog.