Property 101: When it is reasonable for an executor to be remunerated?

GUEST OBSERVER

Generally, where an executor of a deceased’s estate is a spouse, family member or friend, for example, they are not entitled to remuneration, particularly if they already receive a benefit under the deceased’s will. 

If an executor is not remunerated under the Will they can make an application to the court, which has the discretion to allow an executor remuneration for their services where it is just and reasonable (see section 98 Trustees Act 1962 (WA); other states including NSW have an equivalent provision). 

In Atkins v Godfrey [2006] WASC 83 the court stated that it was just and reasonable for the executor (who was a friend of the deceased) to receive remuneration, as there was evidence to show that during a five-year period the executor had spent over 380 hours on the administration of the estate and that the executor had rendered substantial services over that time.

However, the court has the power to refuse an executor’s remuneration on a number of grounds, including positive fraud and dishonesty or if there has been misconduct in the execution of the executor’s duties.

Whilst in the above case there were no acts of fraud or dishonesty, there were two factors which reduced the amount of remuneration the court awarded the executor: 

One - Failure to pursue the administration of the estate with due expedition

Once the assets of the estate were distributed, a dispute arose relating to legal fees paid to the solicitors involved assisting with the administration of the estate, and who represented the executor in relation to a claim against the estate from the deceased's family member.

This conflict caused a delay in relation to finalising the accounts of the estate and the court found that the evidence showed the executor did not take steps to ensure the conflict was resolved expediently.  As a result there was unnecessary delay which reduced the amount the court awarded the executor to reflect that the administration of the estate should have been finalised earlier. 

Two - Failure to scrutinise legal fees

The executor overpaid the solicitors involved in the administration of the estate due to a failure of the executor to scrutinise the invoices to ensure the amounts charged were proportionate to the work undertaken.  This meant the solicitors had to refund to the estate approximately $19,000.  The court decided that as a result of this a modest reduction to the remuneration of the executor would be appropriate.

Other factors relevant to the amount of remuneration awarded in this case included. 

- the estate was not complex for the executor (i.e. the Will was not difficult to interpret, most assets were distributed straight to the beneficiaries and did not need to be sold);

- the amount of time the executor spent on the estate (over 380 hours);

- the responsibility the executor assumed in relation to the court action against the estate; and

- the involvement of professional solicitors and accountants in relation to the estate.

Independent executors can be paid by the estate but it is wise to say so in the Will.  The amount they can receive is clearly dependent on the particular estate but also on the level of efficiency they exhibit in carrying out their role. 

 Peter Townsend is principal, Townsends Business & Corporate Lawyers and can be contacted here.