The North Carolina State Bar has adopted proposed ethics opinion 2024 FEO 3, allowing estate planning attorneys to recover attorney fees in limited situations arising out of lawyers’ participation in collateral litigation related to the estate plan prepared by the attorney. The inquiry was submitted as a result of a substantial increase in the number of estate planning attorneys who are being subpoenaed in caveat litigation and other estate disputes following the client’s death. These lawyers often incur substantial fees and expenses responding to requests for deposition testimony and production of documents.  

The inquiry asked whether an estate planning attorney may ethically include a provision in an engagement agreement providing that the client agrees that the client’s estate will reimburse the lawyer for fees incurred when a lawyer is required to respond to requests for deposition testimony or documents. The American College of Trust and Estate Counsel’s form engagement agreement includes such a provision. 

The ethics opinion acknowledged that, without the ability to include such a provision in an agreement with a prospective client, there could be a chilling effect in cases where the client is elderly or where the family dynamics suggest that a challenge of the estate plan is likely. A lawyer might not be willing to accept such a representation without the assurance that the lawyer will be reimbursed for fees and expenses incurred by the lawyer in future collateral litigation. 

The opinion noted that a lawyer may never include a provision to be reimbursed for fees and expenses resulting from the lawyer’s incompetence or negligence. However, a lawyer may include a provision in an engagement agreement providing for reimbursement of fees and expenses in collateral litigation after the client’s death where four conditions are met. First, the agreement must be limited to proceedings where the law firm is not a party to the proceeding in which information or testimony is sought and where the quality, sufficiency, or effectiveness of the lawyer’s work is not in question. Second, the fees and expenses must not be clearly excessive. Third, the lawyer must make reasonable efforts to minimize the time, costs, and expenses. Fourth, the lawyer must clearly explain in the written fee agreement the circumstances under which the client’s estate is responsible for payment of future fees and expenses.

The ethics opinion provided the following provision as an example that would be acceptable:

Client agrees or directs Client’s estate to compensate Law Firm at our normal hourly rates, not to exceed 3% per annum above Law Firm’s current rate as specified in this agreement, plus costs and expenses, for work done by Law Firm where (1) Law Firm is requested or authorized by you or your estate, or required by government regulation, subpoena, or other legal process, to produce information or our personnel as witnesses with respect to your estate plan or our work for you in the representation; (2) Law Firm is not a party to the proceeding in which the information is sought; and (3) the quality, sufficiency, or effectiveness of the Law Firm’s work is not in question in the proceeding. This obligation applies even if our representation of you has ended. Any fees and expenses charged to Client or Client’s estate shall not be clearly excessive, and Law Firm will make every reasonable effort to minimize time, costs, or expenses related to such a request.

Lawyers who intend to incorporate such a provision into their existing engagement agreement should pay careful attention to the requirement that the lawyer clearly explain to the client the circumstances in which the lawyer may seek reimbursement in the future. You might want to include in writing some hypothetical examples of the circumstances where the provision would be triggered. Those would include situations like a subsequent caveat proceeding where the lawyer is asked to produce her file or is asked to provide testimony regarding the client’s capacity.

By following the roadmap provided in 2024 FEO 3, lawyers may safely protect themselves from incurring substantial fees and expenses in future litigation related to the estate plan prepared by the lawyer.