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Sunday, September 8, 2019

The court allowed an executor fee of $100 million

Though most people know that executors can be paid for handling an estate, the question of how much they should get can sometimes be complex.

Recently I read a blog post by Paula Lester of Scotiatrust who was discussing the executors of the estate of Leona Helmsley. The estate was $5 billion, and the executors asked for the sum of $100 million to be split between the four of them. Though the number seems vast, it amounts to 2% of the estate. To read more on the post in question go to one of my favourite blogs, All About Estates, by clicking here.

It's not unusual that trying to agree on an executor's fee leads to trouble. The more complex the estate, the more fees should rightly be paid to an executor. After all, administering an estate is a heck of a lot of work. Something that beneficiaries and others tend to forget is that even when the estate is relatively straightforward, the executor carries personal liability for each and every asset. That's a lot of risk and a lot of stress. Those factors are also considered when trying to determine an appropriate fee.

One thing you can do to reduce this argument in your own future estate is to mention in your will how much you want your executor to be paid. Don't leave it up to the parties to figure out after you're gone.

When making wills for my clients, I always raise the topic of paying the executor. Most of the parents I talk to in my practice tell me that they assume their children will not want to be paid for the job and therefore there is no need even to mention it. To me, that is making two mistakes in one.

One mistake is assuming that their son or daughter will not want to be paid. Built into that statement are assumptions that all relationships will be good all the time, that there will never be a squabble over anything, that all will go swimmingly. I can't tell you how many sons and daughters start off their estate administration intending not to charge a fee but end up so battered and bruised by the experience that they refuse to walk away empty-handed.

The second mistake is not saying anything about the fee in the will. Again, an assumption is built in. This time it's the assumption that people can read your mind. This is how I explain it to clients: The people who think there should be no fee will say, "if Dad wanted you to claim a fee, he would have said so." The other side of the family, the ones who say there should be a fee, will say "if Dad wanted you to do the work for free, he would have said so."

So who is right? Nobody will know if you don't say so in your will. Until, of course, it's dragged into court and the judge steps in to name the figure that you should have named. In the Helmsley estate, the matter went to court and the judge agreed that $100 million was reasonable in the circumstances. You may not have $5 billion dollars, but who wants to waste what they do have? Addressing the question of how much to pay your executor can save your estate time. money, and headaches.

2 comments:

  1. Lynne
    If only all lawyers were as upfront as you. All lawyers know about this issue , but it is to their benefit to leave well enough alone, as they bill at maximum hourly rates. For many firms, it's all about billable hours, is it not?
    Re my matter. My lawyer and the opposition have without authority, worked it out so that my Executors Compensation is part of 'the mix' . I have never seen this 'mix'.
    If you only knew. TBC.
    Webeye

    ReplyDelete
    Replies
    1. All the lawyers I know who specialize in wills take great pride in producing the best wills they can. Maybe that sounds idealistic, but reputation plays a big part in our continuing business, and we generally know amongst ourselves who is producing good work for clients. Unfortunately, not everyone lives in a big urban centre with a choice of dozens of lawyers with specialties. Some lawyers do their best to service a market that is not large enough to allow them to specialize. I still see wills from time to time that are being made by accountants, financial advisors, and legal secretaries without a lawyer. In other words, situations are not always ideal for the production of a wonderful will.

      Lynne

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