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Thursday, January 13, 2011

Executor's fees, lawyer's fees or both?

Today I'd like to answer another excellent question from a reader that I think will be of interest to many of you. The question is:

"Can a lawyer who writes up a will also be an executor of that will? Also, can he claim fees as both a lawyer and as the executor? And who decides how much the executor receives? If there are two executors, do they both get the same amount? Are there any limits to executor fees? Thanks."

Yes, a lawyer who writes up a will can be the executor, though he should not witness the will if he is named as executor.

At the time the will is drawn, the lawyer will claim his usual fee for writing the will. Later, when the testator passes away and the lawyer acts as executor, he will claim an executor's fee, which would be the same as a non-lawyer would claim. The lawyer would only be able to claim a lawyer's fee on top of that if he did legal work for the estate that would have needed a lawyer in any event. For example, if a lawyer would have been hired to file for probate anyway, then the lawyer/executor (or his firm) can do that work and charge the usual lawyer's rate for that work.

When a lawyer or accountant is named as an executor, it's a good idea to include a clause in the will that specifically addresses the fact that they can be paid professional rates for professional work and not for their entire executorship. The lawyer and the accountant should already know what they can charge, but the other people involved in the will might not know.

If the will states how much an executor is to be paid, then that is how much the executor will receive. Occasionally the amount is set out in dollars, but usually it's expressed as a percentage of the estate. Unfortunately, plenty of wills don't address executor's fees.

If the will doesn't address executor's fees, the executor must fall back on the statute law and case law for guidance. Executor fees vary from province to province, though there are usually only general guidelines to follow. Estates vary widely, depending on the kind of assets, the value of assets, the number and location of beneficiaries, whether there are claims or difficulties, the expertise of the executor and a hundred other things. As a general rule, an executor is able to claim between 1% and 5% of an estate, with only the more complicated estates reaching the top of that range.

The amount the executor receives - within the range mentioned - is normally determined by the residuary beneficiaries of the estate. During the final accounting for the estate, when the executor is ready to cut the cheques to the beneficiaries, the executor should put forth in writing a proposal of the fees he or she wants to claim. The beneficiaries are asked to approve the estate accounting including the proposed executor's fee.

If the residuary beneficiaries think the fee is too high (and quite often that's the case) then the executor and the beneficiaries may be able to negotiate a sum that's satisfactory to everyone.

If they can't agree, the executor's fee must be set by the court. This involves a hearing in courtroom. The estate can't be distributed to the beneficiaries until that has happened because the fee may be set higher or lower than the executor had requested.

If there is more than one executor named, the fee is expected to be split among them. It's not always an equal split. Sometimes one executor has taken on more of the work because of geography, time or skill. The executors should work out between themselves how they are going to split the fee, and if they simply can't agree, it has to be decided by a judge.

26 comments:

  1. Great informative site. I'm really impressed after reading this blog post. I really appreciate the time and effort you spend to share this with us! Car Accident Lawyer Macon


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  2. thanks for this great information... it's quite interesting to have settled things the right and lawful way...

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  3. If the will says the executor is to receive a set amount for acting as personal representative, but he/she then hires an attorney to assist and an accountant to manage... does the estate pay the fees or has the executor essentially hired out their duties and pays out of pocket?

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    1. You have to separate the various roles of executor, lawyer and accountant. Each of them can and should be paid independently of each other. The estate must pay for legal fees and accounting fees for work done on behalf of the estate. Legal and accounting tasks are not the role of the executor.

      Now, keep in mind that if the executor delegates his own work to someone else - including a lawyer or accountant - then that comes out of his executor's fee.

      You mentioned that the accountant was hired to "manage" and I'm not sure exactly what that entails. An accountant's role in an estate is usually limited to preparing tax returns, applying for the CRA clearance certificate, and advising the executor about applicable elections etc. In more complicated estates, the accountant may be involved in more activities, but none of these are really "managing" the estate.

      If the accountant has been hired, for example, to prepare statements of receipts and disbursements for the estate, or to pay the bills for the estate, then that comes out of the executor's fee because that's the executor's job.

      Lynne

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  4. are the attorneys fees ever determined as a percentage of the estates value?

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    1. Yes, sometimes they are. When a lawyer applies for probate on behalf of an executor, he or she may quote a price that is a percentage of the estate.

      Lynne

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  5. My Late Uncle named his lawyer as the executor of his estate and named my sister as the executrix if the said lawyer became deceased, incapacitated or rsignation. Of Course once my Uncle passed he took on the duties of the executor.

    The estate was a fairly simple affair as the Funeral expenses and burial were pre arranged. He did not own any property and had one bank account,the rest of his investments were in life insurance policies paid out to the benificiaries upon his death. A Relative of the deceased prepared his final tax return and applied for the clearance certificate.

    The executor took his merry time wrapping up the estate ( 27 months ) and charged the estate 2.5% for Capital Receipts and also 2.5% for Capital Dispersments on all of the life insurance policies and the monies in his bank account. He also sent the Life insurance policies to probate.

    My question is, do the Life insurance policies become part of the estate where the executor can charge compensation of 2.5% for capital dispurments and capital receipts?and did the life insurance policies need to be included in the probate?

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    1. If the life insurance policies name a beneficiary and not the estate, and the insurance company paid the funds directly to the beneficiary, then no the policies are not in the estate. They should not have been included in the inventory/probate. The executor (whether a lawyer or not is immaterial) should not be charging a fee based on the value of the insurance policies.

      Lynne

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    2. Thanks you for the responce Lynne

      The compensation that the executor is claiming amounts to tens of thousands of dollars. The Life insurance policies cheques were paid out to the benificiaries.

      I believe that we need to challenge the Executors fees in court

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    3. You could always start by giving him a counter-proposal in writing, with your suggestion of what the fees should be. Maybe you can avoid going to court.

      Lynne

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  6. Could you tell me or refer me to the website or legal reference that provides the order in which estate debts are paid I.e. funeral, gov't/taxes, lawyer, accountant,rent, nursing home, utilities, business and individual creditors.My email is Kerry.sydney@gmail.com. Thank-you.

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  7. A solicitor may be named in the will as an executor – in which case, they will generally administer the estate and the cost of probate
    will be charged according to their scale at the time.
    The executor’s job is to gather in all your assets, and after paying off any debts, they obtain a ‘Grant of Probate’ on your estate.
    Finally they pay out the money from the estate according to the Will’s instructions. Estate Litigation Lawyers Sydney

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  8. Dear Lynn -- does Ontario have a rule about how lawyers set fees in advising the executor and other duties? Should there be a written contract with the lawyer? What is the common way this is done? Thanks for any help.

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  9. Interesting, I could sure use some help in this regard.

    I have a lawyer who represents me although I am the Administrator of my Fathers Estate (died intestate as the will could not be found).
    The lawyer that I hired has been giving me HUGE bills and right now his billing is currently over 36,000 dollars. I would like to note that although the Estate is somewhat long and protracted, I have exactly ZERO agreements (written or verbal) with my lawyer and that he finally told me that he was charging me a 'whopping' $400/hour. Needless to say, I'm a bit in shock, especially since the bulk of the work has been done with 'students at law' but now what to do?
    To add to this, today I actually get a account of receipt and disbursements and it appears to me that he has helped himself to funds and has paid himself in FULL (to date). I can swear on my Children's heads that we NEVER discussed a rate, nor contingency (would never do that anyway) and now I'm wondering if I can even FIRE this guy since he's already helped himself to the funds. On the other hand, since the trust funds have been ripped apart, I feel like I just don't have any choice but to let him go ASAP. So having stated the above;

    -Is this even legal for him to do? To be clear, I have signed absolutely 'zip' in terms of agreements or any type of release.
    -What happens to the Trust Funds if I fire him without signing a release? (He made it clear that there is no WAY is he going to give me anything until I sign.)
    -Should I go to the Taxation first, THEN go to the law society?
    -If I fire him will it stop him from taking funds from the account?

    Thanks for your help. I am desperate in Alberta!

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    1. Some of what you're saying makes perfect sense to me, but there's one thing that doesn't: surely you didn't think that he was going to do all this work on a "long and protracted" estate without being paid?

      What lawyers normally do at the beginning of the estate is to send the executor a letter that sets out, among other things, the way that the estate will be billed, including hourly rates. I ask for the client to send back a signed copy of the letter just so I know it's been received and read, but mostly lawyers don't do that. However, if you received a letter talking about future billing and raised no objection at the time, it might be a bit late to say you didn't know his rate. Check back through your correspondence from him to see what you've received. The law society of Alberta requires lawyers to be transparent with clients about how much they'll be billing, and when.

      I'm not saying that this lawyer did everything right, because I have no idea what he sent you, but separate out all the billing and trust fund information and read it all to see what picture is built by the information he has sent. If you feel that he has been over-billing or taking money from trust without your knowledge, you may wish to go further with this.

      Before you decide that the bill is too high, make sure you understand exactly what work was done by the lawyer. Did you just hire him to do the probate and nothing else? Or did you have him doing additional work such as paying bills, making calls, selling the house, preparing an accounting, etc? The reason I ask is that normally lawyers will charge approximately 1% to 1.5% of an estate to get the probate. An hourly rate doesn't come into it. But since you've mentioned an hourly rate, I assume that you've had him doing the extra tasks. It is proper for him to bill you by the hour for that. You may want to look at the Surrogate Court rules for Alberta, particularly at the schedules that describe the core and non-core legal services and how a lawyer may bill for them.

      The work done by the student at law should be billed at a lower rate than that done by your lawyer.

      Also examine the bills that your lawyer sent you and the cover letters with them to see what he said about paying his bills out of trust. Normally that's what estate lawyers do with their bills, since executor bills are paid out of the estate. However, he should have been clear with each bill that it was being paid from estate funds. And ask yourself, if you were getting his bills and not paying them yourself, how did you think he was being paid?

      You have the right to fire the lawyer, of course. He has the right not to hand over the file if his bills are unpaid, but I have my doubts that insisting on a release is ethical. He can still release the file to you if you make payment arrangements for outstanding bills, or if you ask him to send the file to a new lawyer.

      It probably makes more sense to go through taxation first, since if the taxing officer finds that you've been over-billed, that can form part of your complaint to the law society. It might also clarify for you exactly what your complaint is, since paying oneself out of trust funds is not against law society rules when it's done properly. I encourage you to look at the Alberta lawyers Code of Conduct, which can be found on the Law Society of Alberta webpage. I think you'll find it really helpful.

      As you know, in this forum all I can really do is give the general rules and some general information, which I've done. If you wanted to discuss this matter with me on the phone, feel free to call me at 709-221-5511. I charge $250 for a consultation (no hourly rates at my office!)

      Lynne

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    2. Well, we I fired this lawyer and took him to 'Taxation'. I was a bit shocked to see how 'quickly' they ran through the billing and the few questions that they asked. I honestly thought it was going to play out badly considering the lack of evidence that I thought I was not able to show. The final verdict was more than a bit shocking and I am VERY happy to say that this lawyer had his fee reduced by almost $12000.00!! Talk about a 'win' for the good guys. I think the lawyer's hubris got the best of him and the T.O. didn't like it one bit. The taxation officer was 'not happy' when he heard the lawyer mumble something about a verbal agreement (yeah right!) and I believe that he also didn't like the fact that after several years the lawyer couldn't be bothered to come up with some kind of fee agreement.

      I am SO happy that I'm done with this lawyer and we can 'all' now get on with our lives.
      Good Luck Everyone!

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    3. Well done! Although lawyers certainly don't enjoy going through taxation, it serves a very real purpose for the clients. For anyone reading this who doesn't know about taxation, it's a way of going in front of a court officer whose job it is to decide whether your lawyer's bill is fair.

      The story you've told here is an excellent example of how the billable hour system doesn't work for consumers of legal services. Combined with a lack of a written agreement, it's like writing a blank cheque.

      This is why in my little firm, we have banished the billable hour completely.

      Lynne

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    4. My executor wants to resign what is the procedure for this.

      He is mad because I don't agree on the price of the house and vehicles that he wants to sell them for.

      He has asked for a few items that I gave to him and also got a reduced price on a golf cart in the beginning he sad it worked fine but then later offered half of the price we agreed on and said it needed repairs and his dagger wanted it.

      A side from this he had a flea market and price things according to what he wanted.

      I think he is just selling things cheaply.

      Now he said I should pay him 20 dollars an hour for 175 hours work.

      I feel I should be able to sell the house and vehicles for the price I am satisfied with.

      What should I do as I am out of province and feel bullied by his emails.

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    5. Since the executor is part way through the job, he can quit by applying to the court for permission to step down. He will be required to pass his accounts with the court. The court may or may not agree to allow him to step down, but is unlikely to agree if there is nobody to take his place.

      Lynne

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  10. Hello, Nice blog and informative content you provided...An estate is the net worth of a person at any point in time alive or dead. It is the sum of a person's assets – legal rights, interests and entitlements to property of any kind – less all liabilities at that time.
    Probate Lawyers Sydney

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  11. I an wondering if I can request an executor to show me the Financials up to date.
    In what format should he dhow them or can he come up with a figure and a list of items not sold.

    I would like to see a list of sold items with the price he got, invoices and receipts for pay outs and work others have done.

    What am I entitled to see.

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    Replies
    1. Richard, I replied to your question in a new blog post on Oct 12, 2016. Here is the link: http://estatelawcanada.blogspot.ca/2016/10/am-i-entitled-to-ask-executor-for-more.html

      Lynne

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  12. How much is an executor paid if the estate is less then 50,000.00.

    What are my rights if an executor is coerced me into agreeing with him on a sale of poroperty and threatening to resign if I don't agree.

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    1. Normally an executor is paid between 1% and 5% of an estate depending on how complex it is.

      If the executor is threatening to resign over this, there are a couple of possibilities. One is that he is trying to coerce you. Another is that you - and perhaps other beneficiaries - have been tough to work with and he's fed up with the delays.

      So you have some options. You can agree to the sale, and you should agree unless you have some honest, solid objection to that particular sale. If you are holding out because you don't like the executor or because he did something you don't like that is unrelated to the transaction, that is not constructive and may lead to a lawsuit.

      Perhaps you do have a real objection, such as the executor is selling it for too little money. You can ask to see appraisals or realtor's valuations to find out how the price was set. You might just find out that the property is being properly sold.

      Assuming that you have a real objection and your speaking to the executor about it does not resolve your concerns, you have the option to hire a lawyer to deal with the lawsuit that will likely happen when the executor asks the court to give permission for the sale and to dispense with your agreement.

      If the executor wants to resign, he must ask the court to allow him to step down. He can't just quit and walk away unless the court says he can. I hope for your sake there is someone else willing to step in and take over. There will be delays while that new person gets up to speed and there is no guarantee that the property won't still be sold.

      To summarize: pick your battles. Try to resolve them out of court. Be reasonable.

      Lynne

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  13. Hello, Lynn

    Yes you are exactly right

    The executor was my dad's power of eternal I do not know him but felt if my dad trusted him then I would let him be the executor.

    U live out if province and have not seen my dad in over 20 years he left every thing to me as I am the only child.
    I am not sure what the property in Manitoba is worth but I know in British Columbia it is with 10 times more then what the executor wants to sell at.

    In the beginning he said he was not seeing dollar signs and that his role was like a puppet.
    I took it as he would be working with me but he seems to have taken a more aggressive path.
    I felt backed into a corner when he said if I don't sell to the person who offer 20 000 00 for the house that he would resign.
    I lower my price from 35 000.00 to 25 000 00 for that lady.

    But the executor said the house on a double lot with a garage and a storage shed is not worth it and the only reason she is offering me so much is that she owns the house next door.

    At first she offer 12 000 00 and then she went to 20 000 00 we did have another offer at 28 000 00 but it fell threw because the bank would not loan the money.

    I kinda felt coersed into excepting her price when he sent an email stating that if I didn't except her offer he would resign.

    He also told me that I owe him for 175 hours at 20 dollars an hour.

    He does not answer all my emails when I ask him about the financial he just gives me a figure of what's in the bank.

    He has request many items from the house which I said was fine but to send me a lst and I have never seen the list.

    He had an offer on a vehicle which I originally was asking 2800 00 for and it got lower to 2200 00 by him but then he had it sated without giving me a chance to think about it.
    I put 1100 00 into it for brakes drum and a new starter and he still wanted to sell it at 2200 00.

    The executor has only advertised the house once and not the two vehicles.
    Basically I asked him if he could advertise the hose again and possibly give me the names of a couple of relitors out there.
    No responce to this email.
    Recently he had his lawyer send me a legal pay structure document.
    I responded back to the lawyer that I would like to review the Financials.
    I received another email from the executor which read it seems you wast to deal with my lawyer that's OK with me but now this is going to cost you more money.
    I replied to him and said your lawyer contacted me first and mentioned that I have two emails from him that implies he is resigning.
    That's kinda the while story in a nut she'll.
    Also I did try to help him with the sales of the property and the house by posting them on Craigslist and kijiji.
    I don't know what to do now I am completely frustrated by him.
    Also there was a tow on the truck which he tried to barter the price by paying 250.00 in cash but I told him I would like the books to be clean and not have someone come back in the future and put a lean on the property he said it's OK this is a friend of his.
    I advised him to pay the 300.00 and get an invoice.

    Not sure if I can trust him as so far all of the offers are by friends of his.
    I know this was along post but there is really no shorter way to tell the story .
    I appreciate your time and all your advice. Thanks Lynn were so luck to have your pro Bono blog.

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  14. My grandparents estate was substantial and 5 years after they've passed he's sent a bill for 2 million dollars which he says all the beneficiaries must agree to before he pays out the money. The estate was about $37 million. There was a wills variation case and on that money he's only earned about $200k on the invested money over 5 years. Do u think this should be challenged and how is this done.

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