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Tuesday, December 21, 2010

Arriving at a co-executor's fee

You and the co-executor are just about ready to finish winding up the estate, and it's time to think about taking your fee. It sounds simple, but as with most things to do with estates, the rules are unfamiliar. Here are some ideas for getting it right, compensating both executors fairly and keeping the beneficiaries happy.

The will may contain instructions about the amount to be paid in executor's fees. It could say that the executor gets a stated dollar amount as a fee, or that the executor gets a percentage of the estate.  Both are acceptable approaches. If the will includes a clause like this but contains no other instructions, this means that the fee stated has to be divided between the executors. It does not mean that each executor gets the amount stated; they must share it.

This leads to an assumption among most people that the executor's fee must be divided equally. But if you've worked on an estate, you know that the work is rarely evenly divided between the two. Sometimes one lives further away than  the other, or one has more expertise than the other, or simply has more spare time to devote to the estate. Any or all of these factors should be taken into consideration. If one executor has done more than the other, the fee should reflect the division of labour.

However, don't forget that the fee is also intended to compensate for the risk of the personal liability of the executor, so even if you feel that you've done all the work, that doesn't remove the other co-executor from his or her liability and you'll still have to share.

Many wills don't say anything about the fee that is payable to executors. In that case, the co-executors would fall back on the amounts normally awarded in their province or territory, and would share that amount.

In addition to carrying out executor's duties, an executor might provide professional services to an estate. For example, an executor might be a realtor who sells the deceased's home, or might be an accountant who prepares tax returns for the estate. These services are over and above executor's fees. These are things that the executors would have to pay for anyway, and should pay the executor his or her normal rate for those services. The payment comes out of the estate, but not out of the executor's fees. Therefore an executor or co-executor should be paid for their professional services and receive an executor's fee.

10 comments:

  1. Hello Lynne,

    First of all I wish to extend my thanks to you for this and your other articles. They have proven very helpful. I am in a frustrating position as co-executor of my mother's estate (with my brother-in-law). The issue is a glaring disparity between the amount of physical work and time invested between he and I. The estate has only two named beneficiares, my sister and myself - sharing 50-50 and there is no specified direction in my mother's will as to executor compensation.

    At the outset of the estate settlement I had stated my reasonable expectation to my co-executor that the responsibilities be divided equitably. Sadly despite many promises this did not happen. Ninety-five percent of the work of executor was performed by myself. Totalling hundreds of hours over the past year. This is not what my mother envisioned or what I expected to occur. I now find myself in the upsetting position where I feel let down, taken advantage of and even betrayed by my brother-in-law and sister. They share equally in the estate with me but did little to nothing to fulfill what my mother in preparing her will and myself as the other joint executor expected of them.

    This disparity has deeply hurt me and left me thinking that in fairness I should do what I never intended to do - request executor compensation from the "estate", essentially my sister and brother-in-law. I would sincerely appreciate any information re precidents and your thoughts re what, if anything, I should do given the situation.

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    Replies
    1. Hi Rob,
      A lot of adult children begin work on the estate with the intention of completing it without compensation, only to find the job so problematic that they change their minds.

      I assume you've discussed this with the co-executor, since you mention the broken promises, and that he is not responding to reasonable requests for cooperation.

      There is nothing stopping you from claiming executor's compensation, other than your own scruples. I expect that if you claim it, he may decide to do the same, at which point there will have to be some negotiation of the amounts.

      You have two options:
      1. Accept the negative feelings kicked up by this estate, get it over with, and try to move on.
      2. Request executor compensation for the job, explaining to your relatives that you didn't initially intend to do so but felt it to be appropriate since you'd been left with the lion's share of the work. This will open other issues, but that may not be a bad thing since the relationship is already damaged due to their behaviour. It may even spur your co-executor into helping out more.

      I don't know whether this factors into your decision, but executor's comp is earned income and is taxable.

      Lynne

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  2. Lynne,

    Thanks ever so much for your incredibly prompt reply. Your comments are well taken and truthfully I have considered similar options myself over the past few months. The lack of assistance has been discussed with only poor excuses and broken promises of help in return.

    This has been a painful and emotional struggle on so many levels over and beyond what it would have been under better circumstances. Sadly you are correct in that the relationship is damaged. I am not sure it can be repaired as, despite several attempts on my part. I have seen no effort or desire from my sister or brother-in-law to change their attitude or behaviour.

    I am aware that executors fees are taxable income. Initially it was felt, with only two beneficiaries that it made no sense for either executor sharing in the responsibilities to take fees when the inheritance they also share directly or indirectly is tax free. However, the expected responsibility "sharing" never happened while the equal inheritance sharing is rightly and fairly stipulated in my mother's will. She nor I ever suspected the former would occur.

    After much thought and soul searching it is my intention to appeal to some level of fair thinking and morals on the part of my sister and her husband in the hope that they will agree to provide some compensation to me for my time through a greater share of their portion of the estate. I doubt they will willingly do so and if this is the case I am not sure where to go from there other than to put it all aside and move on.

    It frankly troubles me greatly that I even have to think about this however the unfairness of it shocks and hurts me deeply. I have to wonder what would be the case if the situation was reversed and they had done all the work?

    Thanks again for your time and advice. You are very kind and considerate to do this - no surprise as you are a maritimer! Wishing you every success and happiness! :-)

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  3. Hi Lynne,
    My father just passed away and I am still grieving. I never looked closely at the will (copy) which I have had in my possession for 15 years. To my surprise I noticed for the first time that even though I am named the sole beneficiary, my father named the lawyer who drew up the will as a co-executor!! IE "I appoint X and Y ..to be the executors"! I had just never read it carefully before.
    Everything about my father's estate is very simple , he was pensioned and only had a bank account. I myself am a senior citizen and can use the extra money. As for other relatives we simply don't have any, my father was exceptionally long lived, I am the sole survivor of our family. I'm told from previous advice that I most probably don't need to probate, simply the will plus death certificate should suffice for the bank. My father had pre-paid everything for the funeral home though there were some small charges for leftover things. On advice from the funeral director, I authorized that they could charge payment for these small charges to my father's account as that will notify the bank about my father's passing and put the account in "estate form"? So I thought that was a good thing. Apparently funeral expenses can be charged directly to the deceased estate.
    ..
    I am concerned about this lawyer being involved and named. What is to stop him from extorting me? I simply don't need him, the things to do are very simple. I won't contact him until the last necessity. He must have known what he was doing and my father didn't know the consequences as he really trusted this guy. Maybe it's benign, but it places me in a situation of dependency. As far as I can understand I will only need his signature with mine on something to get the bank to transfer the bank assets to me later after the estate is finalized (which is already happening).. Or perhaps I don't need his signature because there may be nothing to sign except show the documents (will plus death certificate)?
    Is there any advice or information you can give me?
    Thanks.
    Max B.

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    Replies
    1. Why on earth would the lawyer extort you? That seems to be a huge over-reaction to the situation. Your father probably added him as a co-executor to make sure you had help if you needed it, or to make sure that if you couldn't do it, someone else was in place.

      If you don't need his help, ask him to renounce. Most likely he'll be more than happy to do that.

      I would caution you about proceeding with the estate without him. He has equal legal authority with you and has a legal right to administer the estate. You are actually risking more by not telling him than you would be by telling him.

      Just give him a call and ask if he'd be willing to renounce his role as executor (or write a letter, if you prefer). I doubt this is nearly as awful as you anticipate.

      Lynne

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    2. Thank you Lynne, for your incredibly prompt reply. I just read the post "Executor's fees, lawyer's fees or both?"
      I am in Canada, as you are.
      Yes, I must respect my father's wishes. I would think keeping the lawyer and paying a percentage fee in the lower range there on the other post as suggested would be reasonable and be in line with my father's wishes. I wouldn't want to meet the lawyer at his office and have him start charging me lawyers fees like that abysmal example in the other post. But I also don't want to be impolite if he's on the up and up. I could invite him out to lunch.
      I have a government form here that asks me to name the executor. It's funny it doesn't leave any space for co-executors but I will have to volunteer the information. So that will be my next step.
      Thank you and I will let you know the outcome.
      Max B.

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    3. Thanks Max, and yes I would very much like to hear about the result.

      Lynne

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  4. Hi Lynne,
    I am coexecutor of my father's will with my sister. I took on the expenses including storage costs, misc. costs, etc. I rented a storage unit to house contents of my Dad's apartment and also continued to pay for a storage unit already in Dad's possession upon his passing (Mum passed away a year earlier)until could get things sorted out and the snow left. My sister has never offered to help with any of the financial costs and in fact was not "available" to even collect the assets. Now almost 4 years have passed and we are now getting things done but not without her being nasty and trying to call all shots. There is no acknowledgment of the financial burden that I carried, only accusations, innuendos and condescending talk. I did what I had to do to keep things safe. I have also recently taken all of Mum and Dad's jewellery to a safety deposit box as I have recently moved and just didn't have a "safe" feeling for it. I did this without consulting her as everything I try to suggest gets met with demeaning language. I am sure of its safety now and I feel much better. I know since everything was in my care, I have the obligation to keep things safe and secure. I hope I did not overstep my role by doing this. I have records of all assets, have compiled all financial information (my parents had no money, have account of my own expenses and have kept a record of anything sold. I believe everything is in order that way. She does not live in area, she did but moved within a year. I have taken on the brunt of all responsibility, all costs, all correspondence. In fact only thing she joined me in was going to the bank to close Dad's account. We do have another sister who is very supportive of choices I have made in order to survive myself financially (re: storage units.. got very costly, had to downsize a couple of times)and is in agreement with jewellery going to safety deposit box. I have not yet even told "co-executor sister" as it ends with me being insulted. I do not like being on receiving end of confrontational/attitude...it is not what my Mum and Dad would want so I try to keep the peace best I can but am at wits end. Please set my mind at ease one way or another... hoping I did the right thing with the jewellery and I cannot be penalized for moving it there for safety.
    Thank you.

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  5. "Just give him a call and ask if he'd be willing to renounce his role as executor (or write a letter, if you prefer)."
    ...
    Thank you for your advice.
    I took it and finally did write a letter and gave my contact info. He simply refused to answer. It's what I feared, he didn't put his name in to "help" me, it was a Trojan Horse. If I don't go through him, I lose my inheritance and it doesn't matter to him, If i do then he helps himself. Without the renunciation, I have no power to negotiate as I am not on the free market to choose a lawyer. So obviously he's saying if he can't make any money, then the heck with me. Just him doing nothing, blocks me.
    As a matter of curiosity, if I was on the free market, is it possible to negotiate a fee with a lawyer beforehand or do they just tell you you how much after it's all over? If the latter case then the whole game is rigged. I could have asked my father to transfer most of it before he passed but I was not proactive.
    In any case it looks like I have lost my inheritance. But at least the lawyer can't get any of it either at least for now. If I live another 15 years I might outlive him and be the only executor. But if I pass first the converse will be true. It looks like a lot of complications and I'll have to make future planning for this in my own will.
    So the co-executor thing is a pretty clever long term Trojan horse. It was a trick, my father didn't know what it meant.
    Max B.

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  6. Hello again Lynne,
    I'd like to ask a few follow up questions.
    At this point, it looks like my father's will cannot be processed until either the lawyer or myself passes away. This make take up to thirty years but probably not more than that considering our ages involved. Unfortunately this is the only practical option left.
    If he passes first I will need to get written proof that he has passed. Do you know how I could get that and from whom in case of such an eventuality?
    ...
    If I pass away first, I will leave a will and leave it to some charity who might have some very aggressive lawyers who can maybe handle this guy better than I can.
    A corollary question is: What if we both pass away in the distant future in the same short period of time, before either of us are notified? Then what happens when there is this will with no executors? I want to make sure the charity gets the funds.

    ..
    Now if he passes first I can probate the will which I need to, as it is a significant amount though there are no other inheritors or estate complications.
    If I was on the free market to hire a lawyer, is it possible to negotiate a fee with a lawyer beforehand or do they just tell you you how much after it's all over?
    To negotiate a deal , it helps to know what is possible and what is not and what the standards might be.
    ...
    Thanks in advance if you answer.
    Max B.

    ReplyDelete

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