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Thursday, April 13, 2017

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.


8 comments:

  1. Lynne,
    I find this posting a little confusing. I am an executor/beneficiary. Because of a disgruntled beneficiary, Estate resolution and settlement has gotten out of hand. I retained a lawyer to navigate this gauntlet. I was asked for Pass Accounts. I did do Informal but Formal was requested. That was unreasonable as I had conducted myself accordingly. Essentially both matched even though the only other residual beneficiary withheld about 18% of Estate funds in a personal account. I had done a workaround and was amazed how close it was. Now, my then lawyer did the work to prepare Formal Pass Accounts according to the rules of the Court.
    This is work I cannot do. Also, I expect to get maximum Executor's fees as I have done a ton of work to resolve and settle a simple Estate. Actually I believe one can ask for extra Executors's fees for over and above 'reasonable' work done. I did as much work as I could do, and I am still doing it. I don't want to discourage others but for me, a 'totally thankless job' to be an Executor. At the Trial stage but still a ways to go.

    ReplyDelete
  2. Should I pay an executor 3000.00 dollars from a 30,000.00 dollar estate when the executor has not given me any transaction reciepts invoices contract etc.

    What should I do the executor loves in Manitoba and I live in British Columbia.

    ReplyDelete
    Replies
    1. Is that $3,000 for a fee? Or $3,000 for fee plus expenses? If it's just for a fee, it's too high, IMO.

      Normally executors provide a summary of expenses without attaching all of the receipts etc. There is nothing strange about it; this is mostly just to ensure that the executor doesn't pay a fortune in photocopying that nobody is interested in. If beneficiaries are okay with a summary, then they go ahead. However not all beneficiaries are satisfied with the summary, especially where something seems a bit off. If you are a residuary beneficiary then you are entitled to ask for copies of receipts, invoices etc.

      It's the executor who should be providing them. Ask in writing, giving specifics of what you want and imposing a reasonable deadline. If that does not produce the information, your next step is to hire a lawyer to get the info. I sincerely hope it does not come to that since it's going to drain an already small estate. I would hope the executor would have more sense than to allow that to escalate.

      Lynne

      Delete
  3. I just don't get it. Many Estate matters are so simple yet they get complicated because of Executors and Beneficiaries that don't play by Estate Laws, Rules, and and Regulations. As to lawyers, that is another part of the equation.
    Each (Executors and Beneficiaries) have an obligation to provide what is necessary within reason. Question is, what is the problem(s) in getting this done?
    My matter. It is one Royal Mess that should never have happened but it did. I am waiting for some Court Action. TBC.
    Webeye

    ReplyDelete
    Replies
    1. The vast majority of estates go through without major issues. Most have at least a couple of minor ones - by which I mean things that do not require the intervention of the courts, lawyers, or mediators to straighten out.

      You're right, though. It usually hits the fan because of someone's refusal to follow the rules that he or she knows bloody well are there but doesn't want to follow.

      The question about getting this done...all I can say is that it has nothing to do with rationality. It's a mix of chips on shoulders, malice, grief, resentments, mistakes that are aggravated by pride or embarrassment, and of course, the cherry on top, which is greed. People are usually at their worst when dealing with an estate.

      There are days when I feel that I simply cannot handle another day of people sitting in my office accusing each other of behaving in ways that nobody would ever believe people could treat their own families. Then I remember I went into this job to try to help folks through this crap, and I start all over again.

      I know you've had a tough time with lawyers. I can see that your posts are genuine. Just please believe that we are not all like that. Most of really do care.

      Lynne

      Delete
  4. Nothing to do with this Post

    FYI
    How the Elderly Lose Their Rights-The New Yorker
    https://www.newyorker.com/magazine/2017/10/09/how-the-elderly-lose-their-rights

    ReplyDelete
    Replies
    1. That article was absolutely frightening. The thought of so many seniors just being uprooted and abused with the sanction of the courts! It's unbelievable.

      As our population continues to age, we are going to see more and more of these predators opening businesses that target the finances of seniors. Hope we're ready for them.

      Lynne

      Delete
  5. Today's G&M-Aug 23/18

    Hey realtors and family members, stop pushing seniors to sell their homes
    https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-realtors-and-family-members-please-stop-pressuring-seniors-to-sell/

    ReplyDelete

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