You are correct that there is an inherent conflict but that's the case with many things that lawyers, and other professionals, do. Hopefully it's an honest attorney involved in which case this shouldn't be a concern. Good luck.
Even if there were a conflict, which I do not believe there is, the attorney is filing the petition. Your argument would make more sense if an attorney refused to file Heggstad petitions, in order to make more money handling the probate. When you place the matter in the hands of the judge, it removes any potential conflict.
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I don't practice in CA, but (as I understand it) the Heggstad petition is a way for individuals who established living trusts to avoid the consequences of their own folly in failing to fund the trust. Look at it this way: everywhere else there's no question but that full-fledged probate is in the cards, at least you in CA have a shot at avoiding the full monty...
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In the most general sense, yes an attorney has a financial incentive to do a probate instead of a Heggstad. However, an attorney has an obligation to honestly advise a client. Failure to do so may be called malpractice, depending on how egregious the situation is. In my experience, sitting down with the client and honestly discussing the case facts and why those facts do or don't fit with certain case law resolves most, if not all, suspicions. However, it takes a long time to go through all of the details, and attorneys are famous for being incredibly busy, and thus letting client communications fall by the wayside. However, if one suspects an attorney of acting improperly, one can always go get a second opinion.
If you think about it, that kind of conflict exists in virtually every case: an attorney could, theoretically, screw something up so as to generate additional work and thus "churn" hours in order to generate higher fees. I have more than once suspected some attorneys of churning. Large firms have sometimes had a reputation for inventivizing this because attorneys have hours requirements, and are frequently rewarding their "top billers." This is NOT to say that this is even a common practice, but rumors have certainly circulated from time to time.
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You have oversimplified the matter.
The executor owes a duty of loyalty to the estate, and the attorney representing the executor must advise the client on prudent administration that conforms to the decedent's intent -- even if it means the attorney could make less from the estate.
Also, whether an attorney can earn more with any given property being treated as in the estate or in the trust depends on the facts and circumstances. While the amount the attorney can make from the estate is based on a percentage, the amount is typically limited to the relevant percentage and the fees must be approved by the court. On the other hand, the amount that can be billed to the trust for filing the petition to collect any assets that should be treated as trust assets is typically unlimited, and can be based on the hourly rate charged by the attorney (rather than a % of the value of the property).
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