May a Louisiana lawyer charge a succession representative a fee calculated as a percentage of the estate's value?

View original ethics opinion (PDF)

Plain-English summary

The opinion addresses the customary practice of calculating a succession lawyer's fee as a percentage, often 2.5 to 3 percent, of the estate's value. It concludes that the arrangement is not automatically unethical and is not a contingency fee under Rule 1.5(c). Completion of the succession and payment of a fee are not uncertain in the way a recovery-based litigation fee is. The percentage method is instead a form of fixed fee recognized by Rules 1.5(a) and 1.5(f)(2).

Rule 1.5(a)'s reasonableness standard applies to the ultimate dollar amount, regardless of how low the percentage appears. A percentage that produces a reasonable fee in one succession may produce an unreasonable fee in another. The opinion identifies particular concerns when the estate is very valuable, valuation is uncertain, or the legal work is limited, routine, or uncomplicated.

The lawyer must communicate the percentage under Rule 1.5(b), preferably in writing, before or within a reasonable time after beginning the representation. Because estate value may not yet be certain, the opinion identifies rough value estimates and example calculations as ways to help the client understand the likely dollar amount.

Fixed-fee lawyers are not required by the Rules to keep time records. The opinion nevertheless explains that time records can permit a reasonableness cross-check and provide support in a fee dispute or disciplinary inquiry. It does not require the percentage fee to equal or fall below an hourly fee, but says that an increasingly high effective hourly rate makes a reasonableness finding less likely.

In practice

Under this opinion, the percentage itself does not establish reasonableness. The relevant question is whether the fee produced in the particular succession is reasonable under Rule 1.5(a), considering estate value and the amount and complexity of the work.

The opinion holds that the lawyer must communicate the percentage and must reassess the resulting amount. If the projected fee may become unreasonably high, the opinion identifies a lower percentage or a different fee arrangement as alternatives; if the effective fee becomes objectively unreasonable, it calls for reduction to a reasonable amount.

Common questions

Q: Is a succession fee based on estate value a contingency fee?

A: No. The opinion concludes that the percentage method is a fixed fee because the succession's completion and the lawyer's fee are not contingent on an uncertain recovery.

Q: Is a customary 2.5 or 3 percent fee automatically reasonable?

A: No. Rule 1.5(a) applies to the resulting dollar amount. The opinion says a percentage that is reasonable for one estate may be unreasonable for a larger estate or a matter requiring limited or routine work.

Q: Must the lawyer disclose the percentage to the client?

A: Yes. Rule 1.5(b) requires communication of the basis or rate of the fee, preferably in writing, before or within a reasonable time after the representation begins.

Q: Must a lawyer using this fixed-fee method keep time records?

A: No. The opinion states that the Rules do not require time records for fixed fees, but explains that records can help compare the percentage fee with an effective hourly rate and support the fee's reasonableness if challenged.

Q: Must the percentage fee be no higher than an hourly fee would have been?

A: No. The opinion rejects that strict equivalence, while cautioning that the higher the effective hourly rate becomes, the less likely the fee is to be considered reasonable.

Background and rules framework

The opinion considers representation of an executor, executrix, or other succession representative who prefers a percentage-based arrangement over hourly billing. It focuses on the ethical classification of that arrangement, communication with the client, and the reasonableness of the fee produced in a particular estate.

Rule 1.5(a) supplies the reasonableness factors. Rule 1.5(b) requires communication of the fee basis or rate. Rule 1.5(c) governs contingency fees, which the Committee distinguishes from the succession percentage method. Rule 1.5(f)(2) is cited as recognition that Louisiana permits fixed fees, although the opinion notes that the subsection specifically concerns fees paid in advance.

Citations and references

Louisiana Rules of Professional Conduct:

• Rules 1.5(a), 1.5(b), 1.5(c), and 1.5(f)(2)

See also

• ABA Formal Op. 505: Fees paid in advance
• Oklahoma Ethics Op. 317: Non-refundable retainers
• Virginia LEO 1606: Retainers, fixed fees, and contingent fees

Source

• Landing page: LSBA Ethics Advisory Service and Opinions
• Original PDF: Public Opinion 21-RPCC-22

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Louisiana State Bar Association
Public Opinion 21-RPCC-221
Lawyer’s Use of Percentage-Based Fees in Representing Succession Representatives

It is not per se unethical for a lawyer representing a succession representative to charge a fee that is calculated with reference to a percentage (customarily, in the range of 2.5 to 3%) of the value of the estate. While not a “contingency” fee, this percentage method in succession matters constitutes a form of “fixed” fee that is permitted by the Louisiana Rules of Professional Conduct. As with all types of fees, however, the agreed-upon percentage shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, and the amount of the fee yielded by application of the percentage must be reasonable pursuant to the factors outlined in Rule 1.5(a). Succession lawyers who use the percentage method in their practices, therefore, should exercise care to ensure that this type of fee arrangement is appropriately within ethical boundaries based on considerations such as the estate’s value and the amount and complexity of the work necessary to complete the succession.

The scenario is a common one: A client named as a succession representative (e.g., an

executor or executrix) appears at the office of his or her lawyer to request representation in that

capacity. The lawyer is willing and able to undertake the representation, but what of the fee?

Unlike other clients, succession representatives, who themselves are taking on duties and

providing a service, may be less inclined to agree to pay by the hour. Historically, some lawyers

confronted with this question have set aside hourly arrangements in favor of a fee expressed as a

small percentage of the value of the estate that is the subject of the succession. On the surface, the

percentage method sounds benign enough. With such succession fees usually ranging from 2.5 to

3% of estate value, typical “contingency” fees in personal injury cases can dwarf them by ten times

or more. For estates of modest value, a fee calculated with reference to a low percentage may be

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The comments and opinions of the Committee—public or private—are not binding on any person or tribunal, including—but not limited to—the Office of Disciplinary Counsel and the Louisiana Attorney Discipline Board. Public opinions are those which the Committee has published—specifically designated thereon as “PUBLIC”—and may be cited. Private opinions are those that have not been published by the Committee— specifically designated thereon as “NOT FOR PUBLICATION”—and are intended to be advice for the originally-inquiring lawyer only and are not intended to be made available for public use or citation. Neither the LSBA, the members of the Committee or its Ethics Counsel assume any legal liability or responsibility for the advice and opinions expressed in this process.

1 sensible, and, more importantly for ethics purposes, reasonable. As the size of the estate increases

and other considerations emerge, however, that calculus can change in a way that may render the

amount of the fee excessive, possibly triggering court review or even a disciplinary investigation.

The purpose of this opinion is to assist practitioners in understanding the nature of these fee

arrangements and the dividing line that separates the permissible from the forbidden.
In

considering this fee practice, the Committee believes that the Louisiana Rules of Professional

Conduct that are most implicated are Rules 1.5(a),2 (b),3 (c),4 and (f)(2).5

What Kind of Fee is It?

Initially, charging a fee equal to a percentage of an estate’s value for representing the

succession representative is not automatically a prohibited fee, but it is not a contingency fee either.

On a fundamental level, no citation is necessary for the point that a “contingency” fee contemplates

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Rule 1.5(a) states:
(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.
3
Rule 1.5(b) states:
(b) The scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate. Any changes in the basis or rate of the fee or expenses shall also be communicated to the client.
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Rule 1.5(c) states in relevant part:
(c) A fee may be contingent on the outcome of the matter for which the service is rendered… 5
Rule 1.5(f)(2) states in relevant part:
(2) When the client pays the lawyer all or part of a fixed fee or a minimum fee for particular representation with services to be provided in the future…

2 that the representation involves a true “contingency,” i.e.¸ the occurrence of an uncertain event—

most often, the prospect that a plaintiff in litigation may or may not recover on claims being

handled by the lawyer and the corresponding risk that there may be no recovery at all and, to the

lawyer’s disappointment, no fee at all. Representing a succession representative is different, in

that the outcome is known and there is no “contingency.” In due course, the succession process

will be completed, heirs and legatees will be placed into possession of the property to which they

are entitled, the lawyer’s client will be discharged from his or her duties, and a fee payment to the

lawyer is all but assured.

For these reasons, the Committee concludes that, despite the use of a percentage for

purposes of determining the amount of the fee, these fees are not “contingency” fees governed by

Rule 1.5(c). Rather, it is the opinion of the Committee that the percentage method for charging a

fee for succession work is a species of “fixed” fee within the meaning of Rules such as 1.5(a) and

(f)(2).6 Fixed fees (sometimes also referred to as flat fees) are generally permissible in Louisiana.

Therefore, charging a fee expressed as a percentage of the value of an estate in undertaking to

represent a succession representative should not be considered a per se violation of any of the

Louisiana Rules of Professional Conduct. Rather, as discussed below, the potential danger lies

elsewhere.

The Rule of Reasonableness

All Louisiana lawyers should bear in mind that—no matter the types of fee arrangements

they utilize with their clients—all legal fees are subject to the standard of reasonableness set forth

in Rule 1.5(a) because a lawyer cannot “make an agreement for, charge or collect an unreasonable

6
The Committee recognizes that, strictly speaking, Rule 1.5(f)(2) concerns the handling of fees paid in advance, which is not the focus of this opinion. That provision is cited as an example of an indicator that fixed fees are recognized and allowed in Louisiana.

3 fee.” Rule 1.5(a). The factors for assessing reasonableness appear in subparagraphs (1)-(8) of that

rule and related jurisprudence. In short, in the succession context, if application of those factors

to the dollar amount to be received by the lawyer under the percentage method yields a reasonable

fee, the arrangement should raise no ethical concerns on that basis. On the other hand, regardless

of the amount of the percentage, if the ultimate dollar amount of the fee to the lawyer is deemed

unreasonable, serious consequences can follow, including review and reduction by the court

presiding over the succession and the possibility of an inquiry in the disciplinary system.

Determining the reasonableness of a fee can be difficult and imprecise. Nevertheless, there

are guideposts that may be helpful to succession practitioners in the fee assessment process.

Initially, and for the reasons discussed above, lawyers engaged in succession work cannot assume

that their “fixed” fees must be considered reasonable merely because the percentage used to

calculate them is lower than a typical “contingency” fee, as often is charged by a plaintiff’s lawyer

in a personal injury matter. Similarly, lawyers should look beyond the amount of the percentage

to the ultimate amount of the fee that the percentage is anticipated to generate.

Consistent with the principle that one size does not fit all, the lawyer should also consider

that a particular percentage that results in a reasonable fee in one succession may produce an

unreasonable fee in a different succession. This is more likely to occur as the value of the estate

increases and/or the amount of work necessary to complete the succession decreases. In other

words, for relatively small to mid-range estates that require only a commensurate level of service

by the lawyer, the percentage method often will result in a fee to the lawyer that is plainly

reasonable. A number of circumstances, however, either alone or in combination, may upset the

usual analysis, including without limitation:

• Estates that are large and known to be valued at a very high level;

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 • Estates where the values are uncertain, and which present incentives to
maximize values to achieve a “step up” in tax basis; and/or

• Estates for which the amount of work required by the lawyer is limited or
where the work performed is routine and uncomplicated.

Accordingly, at the outset of a representation, a lawyer using the percentage method should

evaluate whether, under the circumstances, implementation of a given percentage based on the

value of the estate will lead to the lawyer collecting an unreasonably high fee, such as in a case

involving a large estate with an otherwise routine succession. If that evaluation suggests the dollar

amount of the fee may rise to unreasonable levels, the lawyer should either lower the percentage

commensurately or explore an alternative fee arrangement with the succession representative.

Communication and Clarity

Rule 1.5(b) is clear that the lawyer “shall” communicate to the client the basis or rate of

the fee and expenses for which the client will be responsible. Although the value of the estate may

not be certain at the outset of the representation, the amount of the percentage should be

communicated to the client to comply with this provision. Depending on the circumstances, best

practices may include: (1) providing a rough estimate of the value of the estate for the client on

the front-end of the representation (if possible); and/or (2) using examples and demonstrative

calculations the client can understand to help establish a meeting of the minds as to the dollar

amount of the fee that will be charged for the representation.

Checking and Protecting

Whether in the field of successions or other areas of practice, lawyers who charge fixed

fees are not required by the Louisiana Rules of Professional Conduct to keep records of the time

spent in representation of their clients. The absence of time records thus should not preclude a

5 succession lawyer from defending the reasonableness of a fee calculated pursuant to the percentage

method. Maintaining time records, however, even if not required by the Rules, provides the means

of checking fee reasonableness at the conclusion of a representation and arming the lawyer with

defensive materials in the event of a fee dispute in court or a disciplinary complaint. The former

involves the exercise of comparing the amount of the fee calculated with reference to the

percentage against the amount of the total fee that would have been charged in the event that the

lawyer had undertaken the representation on an hourly basis at a reasonable hourly rate.

This is not to say that the amount of a fee in a succession representation using the

percentage method must be the same as or less than the fee that would have been due had the

lawyer taken the matter by the hour. It is rather to say that, as the lawyer’s “effective” hourly rate

for the services performed climbs higher, the odds of the succession fee being deemed reasonable

will decrease.7 If the resulting “effective” hourly rate becomes objectively unreasonable, the

lawyer should voluntarily reduce the percentage of the fixed fee in the succession to a reasonable

amount that comports with Rule 1.5(a).

Conclusion

It is not per se unethical for a lawyer representing a succession representative to charge a

fee that is calculated with reference to a percentage (customarily, in the range of 2.5 to 3%) of the

value of the estate. While not a “contingency” fee, this percentage method in succession matters

constitutes a form of “fixed” fee that is permitted by the Louisiana Rules of Professional Conduct.

As with all types of fees, however, the agreed-upon percentage shall be communicated to the client,

preferably in writing, before or within a reasonable time after commencing the representation, and

7
To avoid confusion, by “effective” hourly rate, the Committee is referring to the total amount of the fee divided by the total amount of time expended in the representation. For instance, a lawyer who spends 10 hours handling the succession of an estate valued at $100,000 in exchange for a fixed fee of 2.5% of the estate’s value would be deemed to have an “effective” hourly rate of $250 for purposes of this cross-checking exercise.

6 the amount of the fee yielded by application of the percentage must be reasonable pursuant to the

factors outlined in Rule 1.5(a). Succession lawyers who use the percentage method in their

practices, therefore, should exercise care to ensure that this type of fee arrangement as

implemented in a particular case is appropriately within ethical boundaries based on considerations

such as the estate’s value and the amount and complexity of the work necessary to complete the

succession.

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