Technology Probate

Technology Probate provides information on current technology and microcomputer software of interest in the probate and estate planning areas. The editors of Probate & Property welcome information and suggestions from readers.

In my last column, I mentioned that my book on estate automation would be published jointly by this Section and the Law Practice Management Section. Entitled Wills, Trusts, and Technology: An Estate Lawyer's Guide to Automation, the book is now available from the ABA publications (link ABA publications to /rppt/sectionpubs.html) center. Excerpted with permission, this column previews some issues discussed in the book.

Billing for Technology
Automation may require investments of both time and money and yet result in a loss of revenues if the same tasks can be performed in less time with automation and the client is being billed on an hourly basis. And yet the Model Rules of Professional Conduct do not include the capital investments of the lawyer as a factor that may be considered in determining the propriety of a fee. Under Rule 1.5(a), the factors to be considered in determining the reasonableness of a fee include "the time and labor required," as well as other factors, but none of the other factors include the time and expense of constructing an automated system to reduce the time and labor required.

At best, the Model Rules allow a lawyer to charge "the fee customarily charged in the locality for similar legal services," so that a lawyer can continue to charge the same fee that would be charged by another lawyer on an hourly basis, even though the automated lawyer spent less time. Model Rule 1.5(b) also requires that, when a lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation. Once a lawyer has communicated to the client that fees will be based on hours spent and an hourly billing rate, a departure from that fee agreement may constitute a breach of ethics, regardless of whether the fee might have been reasonable if originally agreed to by the client. See ABA Formal Opinion 93-379 (12/6/93). Thus, if a firm wishes to change its billing practices to take into account the costs (and benefits) of automation, it is essential that the new billing policies be communicated to both new and old clients.

Alternative Billing Methods
Although "the time and effort required" is the first consideration in determining the reasonableness of a fee, those who have written on alternative billing methods have generally agreed that billing does not need to be based on billable hours, as long as the resulting fee fairly reflects the value of the services to the client. In attempting to develop billing methods that take into account the savings in legal time that result from automation, lawyers should consider the following possible approaches.

In estate planning, there can be a distinction between the plan-ning process (including meetings, consideration of tax and legal issues, research, calculations and recommendations) and the drafting process (which can be heavily automated). One possible billing method would be to charge clients an hourly rate for planning but to set fixed fees for the documents (and possibly the calculations) that are recommended to carry out the estate plan.

Fixed Fees
When attempting to set fixed fees for document drafting, it is appropriate to consider the complexity of the documents and the benefits to the clients that should result. For example, documents that incorporate marital deduction planning are automatically more complicated (and provide more tax benefits to the clients) than documents with comparable trust provisions that do not require marital deduction planning. Documents that involve charitable planning should require higher fees than documents without any charitable deduction planning.

In estate, trust or other fiduciary administrations, fixed fees may be set for the relatively routine aspects of administrations (such as petitions for probate, inventories and tax returns), while reserving hourly billing rates for matters requiring legal judgment, such as the interpretation of the governing instruments and rights under state law; tax elections to be made by the fiduciaries; the valuation and disposition of real estate, closely held businesses and other unusual assets; and the timing and character of distributions.

In attempting to determine fees for inventories, bookkeeping, ac-countings, tax returns and other mechanical aspects of fiduciary administration, consideration should be given to a system of fees based on the number of assets and transactions to be reported, rather than the time needed to record the assets or transactions or the value of the assets or transactions. Generally speaking, preparing a list of 10 publicly traded securities should take about one-fifth of the time it would take to prepare a list of 50 publicly traded securities, and a base fee could be included for the time (and costs) of producing an accounting or return with no assets. The costs of the software needed to produce the accountings, tax returns or other documents could be one of the factors included in the calculation of the base fees.

A Welcome Departure
Whatever billing methods a lawyer may choose, a departure from the standard hourly billing system is practically required by the use of automation and will probably be welcomed by clients who are concerned about hourly billing and the uncertainty of legal fees.

Technology_Probate Editor: Daniel B. Evans, P.O. Box 27370, Philadelphia, PA 19118 -

Probate & Property Magazine is published six times annually and is included in section members' annual dues.