May 28, 2024
Trustees , including estate trustees, are entitled to compensation for their efforts. But how much?
The lawyers for the trustees (or for the estate) are entitled to payment. But how much?
What if the same person acts as trustee and lawyer? How are they compensated?
The ultimate decision is up to agreement between the lawyer/trustee and the beneficiaries, or alternatively, the court on a passing of accounts. The result depends upon the unique facts of each case.
Because of this, the result in Williams v. Williams Estate (also known as Williams v. Crate, Mr. Crate being the lawyer involved) is simply one possibility, but what is instructive about the decision is the review of the basic principles which guide the court on all three questions.
Crate acted as both lawyer and executor. People preparing wills not infrequently ask their lawyer to act as executor, but it is usually better to select a friend or relative, to avoid confusion of roles, as happened in this case.
The Williams estate was relatively straightforward- a home to be sold, and some cash or investments to be cashed. Administration was completed within one year- Mr. Crate deserves plaudits for this.
Crate sought $300,000.00 as executor’s compensation, on an estate of over eight million dollars.
The Crate law firm charged $96,706.73 in legal fees.
Part of the confusion was because of the overlap of legal work and administration work. Part was because, as our earlier article discussed, there are two separate approaches to how courts assess fair compensation a “tariff” based on the value of the estate; or the “five factors” determined by earlier cases to estimate the care, pains, and troubles of the trustee.
The confusion compounded because the Williams will originally contemplated a corporate trustee affiliated with a bank. The corporate trustee had their own compensation scheme, similar to the tariff, but not the same. The deceased had signed the form of agreement containing that formula, though the agreement never was used.
Since Crate was doing the same work as the corporate trustee, he calculated the fees on that formula at $444,729.49. Which makes $300,000.00 look fair.
Except some of the work normally done by an estate trustee was charged in the legal fees. To allow them both would result in “double dipping”.
The judge hearing the passing of accounts looked at both aspects of the compensation, and the total.
Estate legal fees are allowed based on what is reasonable. Years ago, estate lawyers used a “tariff” (which differs from the tariff used for trustee’s compensation) to set those rates. That tariff depended mainly on the size of the estate. The tariff no longer exists. The amount of time and, the results accomplished, are the main factors, plus the same factors considered in assessing any lawyer’s bill.
The Crate legal fees did not follow the old tariff, but instead used a different formula. It was not based on time or results. Time records were not kept, so the judge could not resolve a number reflecting the time. Instead, they looked at the work done, removing items that were properly part of the executor’s work. Once that was the done, the remaining list was compared to the original list of legal services. The $85,000 in legal fees was reallocated. The estate was ordered to $20,000.00. The remaining fees, disbursements and taxes were allocated to a reduction in the estate trustee’s compensation.
That is quite a difference, but despite the size of the estate, the legal work was straightforward.
The trustee was not allowed to rely upon the “bank” formula to calculate fees, not was it allowed to charge the entire amount of the typical tariff (which came as a bit of a surprise, for reasons discussed in our prior article). That tariff applies to estates of average complexity, and the judge determined, as with the legal fees, that the Williams estate was of less that average complexity.
Comparing the needs of this estate to their estimate of average complexity, the judge allowed $260,433.83 plus HST. This was reduced by the $65,000.00 overpaid to the law firm for a net of $194,933.34.
As a result, the total fees were reduced from $385,000.00 to just less than $280,000.00 – still an impressive figure, but modest for an eight-million-dollar estate, and a reduction of over twenty percent of the original claims by Crate and the law firm.
TAKEAWAYS
- Calculating estate trustee compensation is a complex and subtle exercise.
- Legal fees for estate work should reflect time and results plus other factors- the same as most other legal fees.
- There is no longer a tariff for legal fees.
- Appointing the same person as estate trustee and lawyer complicates the calculation of fees.
- “double dipping” on trustee’s work charged as legal fees is not permitted.
WHAT WEILERS LLP CAN DO TO HELP YOU
If you’re a trustee, the estates lawyers at Weilers LLP can help you with difficult questions about your duties, or the administration of the estate in general. If going to court is necessary, we have a full range of experience for any situation from an application for directions to a full blown dispute such as in Williams.
Our litigation team is skilled in identifying issues, understanding the evidence required to prove your point, and presenting the case in court.
Whether preparing a will, acting as trustee, or a beneficiary, if you have questions about estate administration or litigation, give us a call and see if Weilers are the right lawyers for you.