WARREN M. YANOFF
ATTORNEY AT LAW
7/6/13 Massachusetts Lawyers Weekly > Print > GAL blows whistle on overbilling by big banks
Massachusetts Lawyers Weekly http://masslawyersweekly.com
GAL blows whistle on overbilling by big banks
by David E. Frank Published: July 3rd, 2013
When Warren M. Yanoff agreed to review the fees a bank charged to administer an Ashburnham woman’s $5.5 million estate, he assumed it was a runofthemill guardian ad litem appointment, much like others he has accepted over the years.
He could not have been more wrong.
Before Fostine Todd died in 2007 at age 91, she hired an institution — later bought out by TD Banknorth — to be the executor of her estate and the trustee of a charitable trust that had been created a decade earlier. To avoid the appearance of a conflict created by the bank’s dual role, Yanoff was assigned guardian ad litem.
Yanoff said his review revealed a shocking discovery: the bank had submitted an $88,104 bill for approximately 30 hours of work.
“If I nominated myself as executor and got taken to the Board of Bar Overseers for billing a client as much money as the bank did here, I’d get my head handed to me,” Yanoff said. “The idea that the fee worked out to about $3,000 an hour didn’t sit right with me and was something I couldn’t ignore — even if others might have.”
A trusts and estates lawyer since 1979, Yanoff said he filed a report at Worcester Probate & Family Court arguing that the bank violated its fiduciary duties by engaging in a widespread practice rarely challenged by practitioners.
Under G.L.c. 206, §16, an executor in Massachusetts is permitted to charge a “reasonable” fee. However, the practice among financial institutions is to charge according to a fee schedule under which the bank takes a percentage of the estate, Yanoff said.
While fee schedules are recognized in some states — such as Florida, New York and California — the law in Massachusetts is silent on the issue. But Yanoff noted that the Appeals Court and various trial judges in the state have issued rulings that “strongly disapprove” of compensating fiduciaries on a commission basis.
Even in states that allow such fees, he said, no court would permit a bill in a case like Todd’s to exceed the $25,000 to $30,000 ballpark.
When TD Banknorth confirmed that it had in fact calculated its bill in the Todd case using a fee schedule, Yanoff said, he took the matter to a judge.
“When I confronted the bank with my concerns, they justified charging such a fee by saying that’s what banks do in Massachusetts,” the Worcester solo said. “I don’t dispute that it’s the accepted practice in the industry in Massachusetts, but that’s not a legitimate defense, and it’s not one that I, or any other lawyer acting as a GAL, should be willing to accept.”
Because Chapter 206 requires that payments be courtapproved, Yanoff filed a report recommending that Judge Leilah A. Keamy not sign off on the account. Shortly before she was scheduled to hear the matter, TD Banknorth’s lawyer, Bruce D. Berns, agreed to cut the bank’s fee in half, Yanoff said.
Berns, who practices at Abendroth, Berns & Warner in Wellesley, declined to discuss the bill when contacted by Lawyers Weekly.
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7/6/13 Massachusetts Lawyers Weekly > Print > GAL blows whistle on overbilling by big banks
“This is just not something that should be in the newspaper. I am astounded that [Yanoff] would talk to you,” Berns said before hanging up the phone.
‘Normality’ to big fees
Yanoff said he is speaking out because he believes it is important for lawyers to be aware of what he deems a “statewide problem.”
A onetime estate planning consultant to Sun Life Financial, Yanoff said many financial institutions in Massachusetts use fee schedules and that he is not singling out TD Banknorth.
“I’m not saying there is malfeasance going on by lawyers involved in these cases, but when large firm attorneys get appointed to review these accounts, there is a normality to these big fees, which all the banks are charging” he added. “I don’t dispute that it’s the accepted practice in the industry in Massachusetts, but that doesn’t make it right and that doesn’t mean that lawyers like me shouldn’t try to put a stop to it.”
Executors are appointed positions, and the tasks are the same whether they are handled by an individual or a bank, Yanoff said. When attorneys advise clients to use an institutional executor like TD Banknorth, they should be informed in writing how they will be charged. Yanoff said that is not done regularly.
“The problem was that there was no fee agreement here,” he said. “There weren’t even any documents indicating an assent or an acknowledgment of the fee.”
When he asked TD Banknorth to provide a log of its work, the bank refused, allegedly insisting that no time records existed. It was only after discovery that Yanoff concluded the bank had little administrative involvement in the probate of the estate. (See sidebar.)
According to Yanoff, the bank hired attorney Henri L. Sans Jr. to do the bulk of the work for $25,000. The Gardner attorney did not return a call for comment.
‘Tip of the iceberg’
Jay Z. Aframe of Phillips, Silver, Talman, Aframe & Sinrich in Worcester was retained by Yanoff as an expert in the Todd case. Had the matter gone to a hearing, the estate planning attorney was prepared to testify that the fees charged by the bank were outrageous.
While banks often justify taking a percentage of an estate by entering into an otherwise valid contract with the decedent, Aframe said, no such evidence existed in the Todd case.
“In acting as executor, often times you have very simple estates where a percentage basis can produce a fee that is just way beyond what most people would consider reasonable,” Aframe said. “Banks do a very good job as trustees, and typically their fees are in line with what many people would charge. But I, as an attorney, tend to shy away from having clients choose banks and financial institutions for situations just like this, where there isn’t a whole lot of work to be done but the fee is based on the size of the estate.”
Braintree trusts and estates lawyer Brett A. Kaufman of Schlossberg LLC said a fee that translates to $3,000 an hour does sound like a lot of money, but noted that there is no one factor courts consider when deciding what constitutes “reasonable.” A judge certainly could look at how other banks charge clients in similar situations, he said, while also considering the size of the estate, the marketable nature of the assets, the time required to complete the work, and the factual and legal questions involved in the estate’s administration.
“But without knowing all the facts of the case and without knowing what went into that bill, it’s hard to say who’s right and who’s wrong,” he said of the Todd case. “What I think the court would look at is what was done for the client in terms of the hours spent, the type of experience the involved participants had, and exactly what kind of liability the bank was taking on to be a fiduciary.”
Kaufman said banks typically charge more because they perform many roles internally, as opposed
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7/6/13 Massachusetts Lawyers Weekly > Print > GAL blows whistle on overbilling by big banks
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to individual executors who are more likely to farm out tasks.
“You also have to look at whether the client knew what the fee structure was prior to naming them as a fiduciary,” he said. “If someone decides to name a bank as executor, then there’s a reasonable expectation of what banks charge and what’s included in their services.”
But Charles M. Waters of Boston’s Sheehan, Phinney, Bass & Green said Chapter 206 is in place to prohibit practices like the one that came to light in the TD BanknorthYanoff matter. Waters successfully convinced a Barnstable Probate & Family Court judge in 2010 to strike down the fees of two prominent attorneys who had charged an excessive amount in their handling of a Cape Cod millionaire’s estate.
“It doesn’t surprise me at all that there were shocking fees charged to this account by the bank,” Waters said. “I think this is just the tip of the iceberg of a much larger problem. This type of overcharging is done regularly because there is an expectation that there are no checks and balances for overbilling, so banks and others have no problem doing it.”
Waters said he believes some administrators charge excessive fees because they know they can do so with little scrutiny. In most circumstances, a GAL is not going to be involved, and it is only the beneficiaries — often unsophisticated parties not in a position to object — who are made aware of the fees.
“The most disturbing part about this is the notion that a bank knew full well that they had spent a minimal amount of time and yet charged almost $90,000 thinking that they could just get away with it,” he said. “The root of the problem is the concept that there is this goalongtogetalong mentality with banks being appointed as administrators and issuing these huge fees to the court — and expecting that they are going to get rubberstamped. Good for [Yanoff] for doing something about it.”
Bank logs 30 hours on estate
In his role as guardian ad litem for the estate of Fostine Todd, Warren M. Yanoff set about compiling information on the billing practices of the executor, TD Banknorth. The Worcester lawyer learned the estate was billed an estimated $88,000 for approximately 30 hours of work on the bank’s part. That work consisted of the following tasks:
• Close and collect bank accounts in Todd’s name; • Obtain date of death values for assets in which she held an interest at the date of death; • Research abandoned property in her name; • Review appraisals of tangible personal property and real estate owned by Todd; • Examine her personal tax returns to ascertain if there were any uncollected assets or tax transactions affecting her final income tax returns and estate; • Gather information and prepare personal state and federal income tax returns; • Prepare federal and state fiduciary income tax and estate tax returns; • Provide information necessary for the preparation of the estate inventory; • Prepare a first and final account in the estate; • Distribute estate assets as provided in the decedent’s will and living trust. — David E. Frank
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