Iowa probate courts impose high legal duties on executors and personal representatives who work probate matters on your behalf. Iowa probate code also mandates the fees these fiduciaries can charge you for their services.
Unfortunately, some executors collect excessive probate fees. When this happens, beneficiaries must file a lawsuit to remove and replace the fiduciary and seek an order that forces the executor to repay the overcharges made to the estate.
In this post, we’ll examine when probate fees become excessive and how to protect yourself from being overcharged by an incompetent or fraudulent executor. We’ll also discover why it’s essential to scrutinize an accounting from in an estate where you stand to inherit assets.
Proper Probate Fee Billing in Iowa
Because probate matters can become complex, Iowa Code allows executors to compensate themselves for work performed. Probate fees are fixed in the Code, meaning there is no room for negotiation. Your executor can only charge you according to the law and must always have your best interests in mind when working on an estate where you’re a named beneficiary.
Compared to other states, Iowa’s probate fees are modest. Iowa Probate Code §633.197 holds that attorneys, executors, and personal representatives can receive the following reasonable compensation for services rendered:
- $220 for estates less than $5000.
- $220 plus 2% for estates over $5,000; and
- fees of more than 2% when the courts find the estate to be “complicated.”
The two percent figure only applies to the estate’s gross assets listed in the probate inventory, which cannot include life insurance proceeds that are non-payable to the decedent’s estate.
Suspicious Probate Fee Overcharging
The fundamental duties of an executor are to gather estate assets and debts, prepare estate accountings, pay creditors and taxes, and distribute any remaining assets to beneficiaries.
Fees for executing these tasks must be reasonable and comply with Iowa Probate Code. State legislators have defined what is “reasonable” per the fee guidelines noted above. However, this policy is not infallible. Let’s look at some red flag scenarios that may reveal when an executor has charged you excessive probate fees.
You receive an estate accounting where the executor has charged $1,000 for probate services. Yet, the small estate only held a used car, old furniture, and a few jewelry pieces in probate inventory. According to the report, the items were worth $50K. However, the old car had a blue book value of only $2K, and the other assets were worth less than $1K. If the estate held a value of less than $5000, the executor should have received only $220 in fees.
Your executor believes an old family heirloom is complicated to sell and asks the court to provide fees above the statutory two percent. You later discover that the fiduciary never hired an accountant or auditor to evaluate the heirloom sale. Evidence also proves that the “difficulty” in disposing of the heirloom was based only on the executor’s opinion and limited experience in selling expensive assets. Thus, you may consider any extra fees charged regarding the asset to be excessive.
Excessive Probate Fee Lawsuits in Iowa
In 1904, the Supreme Court of Iowa considered the state’s first lawsuit regarding excessive probate fees. In re ESTATE OF SAWYER, it held an executor is only entitled to recover “a reasonable value” for services rendered. In this landmark case, the Court further reduced the $400 in executor fees received (for settling a $2,000 estate) to $150.
The judiciary has consistently affirmed the SAWYER Doctrine for over one hundred years. Most recently, the Supreme Court of Iowa sanctioned an executor attorney for collecting “unreasonable” probate fees after overvaluing an estate in his care.
The law accordingly allows you to file equity actions in court to reclaim cash or assets lost from an executor’s overcharging of fees. You may also petition the judiciary to remove and replace a fiduciary in the same lawsuit.
Iowa civil procedure gives you up to two years to file your excessive probate fee lawsuit. In other words, you’d have two years from discovering the unfair billing to recover your losses in court.
The restitution sought may include the following:
- Cash, real estate, or personal property unfairly taken by the executor (including interest).
- Court costs and attorney’s fees you paid while seeking recovery.
Estate Accountings in a Nutshell
Iowa Probate Code compels executors to file several estate accountings with the courts during their tenures. Fiduciaries must also perform informal and formal estate accountings when beneficiaries request them during probate proceedings.
An estate accounting is a financial report that details the assets and debts of an estate held in probate. It also records how much executors have charged in fees and how they distributed remaining estate assets among heirs.
The law only allows certified CPAs to prepare formal estate accountings. It further holds that each beneficiary should receive an accounting within six months of the decedent’s death. Interested parties may also request informal accountings at any time during an executor’s tenure.
Protecting Inheritances from Excessive Probate Fees
You can take some action to protect your estate from accruing excessive probate fees.
- Review section 633.197 of Iowa Probate Code and know the value of the gross assets listed in the probate inventory.
- If you disagree with the estate’s gross value, request an informal accounting from the executor or a formal estate accounting from the courts.
- Scrutinize all estate accountings you receive and have a third-party CPA audit them.
Executor Removal Action for Charging Excessive Probate Fees
When you hold evidence showing an executor has overcharged you in a probate matter, you may file a court action to remove or replace the fiduciary. This process is complex and often calls for the services of an Iowa probate dispute lawyer for resolution.
Executor removal lawsuits involve:
- Filing a petition with valid prima facie arguments.
- Completing pre-trial and discovery motions.
- Gathering evidence and arranging expert witness testimony.
- Complying with procedural rules, and
- Litigating the case in court.
You may pursue removal action without an attorney and complete the steps outlined above by yourself (per se). However, the executor will retain a lawyer to defend the lawsuit using estate assets. You will thus be in a much better position to win if you have a skilled probate litigator in your corner to protect your interests.
In Conclusion …
Today, we reviewed how to recognize when executors charge you too much in fees. We also discussed excessive probate fees in general and what to do when you believe a fiduciary has unfairly taken from your inheritance. Iowa Code allows you to recover unreasonable executor fees. You may further file an executor removal and replacement lawsuit when you hold proof that your fiduciary has negligently or willfully overbilled you.