Executor fee reduced by amount delegated to lawyer

There is a new, interesting case from Ontario that talks about executor's fees and how they work with lawyer's fees on an estate.

Dorothea Elina Elines passed away in 2012 leaving an estate of about two million dollars. The executors were her niece and nephew. There were 10 beneficiaries. The estate wound its way through the usual process, with partial distributions being made to the beneficiaries. During the course of the estate, the executors hired the sort of help that most executors hire, including a lawyer, a tax preparer and an accountant.

The executors requested compensation of $45,034.82. This represented about 2.5% of the estate, so it fell within the usual parameters of an executor fee. However, some of the beneficiaries took issue with the amount being paid on the basis that the estate had already paid a lawyer to do some of that same work and therefore they were paying twice for the same work.

The court then examined the lawyer's bills and investigated the issue of who had done what on the estate. The court made it clear that it is perfectly alright for the estate to pay a lawyer to do legal work and that does not affect how much an executor can claim for doing his or her work. However, the court was equally clear that if the executor delegates his work to the lawyer and the estate pays the lawyer, then the executor cannot charge for that work as well.

In this particular case, the issue was aggravated by the fact that the lawyer's bills were not detailed as to exactly what work was being done. They referred simply to "our services".

At the end of the day, the court reduced the compensation for the executors by $37,512.57. This means that out of the $45,034.82 originally claimed, the executors had to settle for $7,512. All of the reduction was from amounts paid to the lawyer, as the court didn't find any duplication with the amounts paid to the tax preparer or the accountant.

This case should make executors think about the work they are asking their lawyers to do. As mentioned, there are matters in estates that are purely legal work such as applying for probate, preparing documents for the sale of land, and preparing Releases. The estate is expected to pay for those services. But other matters often delegated to lawyers are not strictly legal matters; they are the job of the executor. These would be such tasks as preparing the accounting, paying the bills, and writing to various parties to get estate information. It is perfectly legitimate for the executor to ask the lawyer to do the work, but it is not alright for the executor to get paid for work he has asked someone else to do.

As an additional tip for executors, I suggest that if the bills you're getting from your lawyer don't contain descriptions of individual tasks but only refer to "our services", you might want to insist on more detail. It might be enough to keep a case such as this one out of court.

To read the case of Elines et al v. Ollikainen and Elines (2017, Ontario Superior Court of Justice), click here.