Will-makers often choose lawyers or accountants to be their executor. Disputes over executor’s remuneration can arise even in situations where the deceased’s Will contains a “charging clause” which permits the executor to charge professional fees for estate-related work. Charging clauses can provide clarity and may reduce the likelihood of a dispute, but by no means do they provide a blank cheque. In Le Gallais Estate (Re), 2018 BCSC 388 estate beneficiaries successfully challenged an executor’s remuneration and legal fees despite an explicit charging clause in the deceased’s Will.
BC Will allows executor’s remuneration and fees for legal work
Ms. Le Gallais was an only child who never married or had children. Her long-time friend and solicitor, Constance Isherwood, prepared Ms. Le Gallais’ Will, which left the residue of her estate to six charities in equal shares. The Will appointed Mrs. Isherwood as executor and allowed Mrs. Isherwood to charge the estate for legal services in addition to receiving executor’s remuneration. The charging clause read:
If the said Constance Dora Isherwood should act as Executrix of this my will and should also attend to the legal work of my estate, she shall be entitled to the usual and proper charge for such legal work.
From 2008 until Ms. Le Gallais’ death in 2015 at the age of 94, Mrs. Isherwood also managed Ms. Le Gallais’ financial and personal affairs under a power of attorney. While acting under the power of attorney, Mrs. Isherwood’s law firm received and reviewed all of Ms. Le Gallais’ personal mail including banking records. Mrs. Isherwood was aware that Ms. Le Gallais had pre-paid for end of life arrangements with a local funeral service provider. She also knew that Ms. Le Gallais wished to be cremated and did not wish to be honoured in a funeral or memorial service.
“Simple” estate to be administered
At the time of her death, Ms. Le Gallais was a resident of Oak Bay Lodge care facility in BC. She held no real property when she died. Her estate consisted of financial assets, such as GICs, Canada Savings bonds and shares in various companies. Mrs. Isherwood had been managing the dividends and interest paid on these passive investments for many years prior to Ms. Le Gallais’ death. After calling in all assets, the estate’s value was $1.6 million. The estate’s value increased during the administration by $32,588.63 but that was largely a result of dividends and interest paid on the passive investments. But for the opening of a brokerage account, dealing with a life insurance policy, and addressing a few banking errors, this estate was noted to be of the very simplest type to administer.
Both executor’s remuneration and legal fees claimed
The setting of executor’s remuneration is governed by s. 88 of BC’s Trustee Act. Generally speaking, executor’s remuneration should not exceed 5% of the capital assets (see here for our BC estate litigation firm’s more detailed discussion of entitlements under the Trustee Act). Mrs. Isherwood claimed executor’s remuneration of $38,950, or 2.5% of the capital assets. Mrs. Isherwood’s law firm also sought payment of $17,550 for legal fees, disbursements and taxes. Five of the six beneficiaries disputed the executor’s remuneration and legal fees as claimed. If both were allowed as presented, the total amount to be disbursed to Mrs. Isherwood and her law firm from the estate would be $56,500. After reviewing all of the evidence, the Court ordered payment of $31,261 (executor’s remuneration of $25,000 and $6,261 legal fees, disbursements and taxes).
What was fair executor’s remuneration in this BC estate case?
The entitlements set out in the Trustee Act are a rough guide to assist in appropriate computation of a BC executor’s fee. The overarching concern is for remuneration to bear a reasonable relationship to the work and responsibility involved, based on criteria including the magnitude of the estate, the care and responsibility involved, the time occupied in its administration, the skill and ability displayed, and the success achieved. Mrs. Isherwood did not contemporaneously record her time for performing executor’s tasks, but estimated the total time to be about 77 hours. The Court found this to be excessive. While the magnitude of Ms. Le Gallais’ estate spoke for itself, the value of the estate was not reflective of the risks and requirements of its administration. In the Court’s view, the executor was not tasked with a great deal of care and responsibility in this administration given the secure or passive nature of the estate assets. As well, as Ms. Le Gallais’ attorney, friend and solicitor, she was already familiar with the estate assets and the testator’s intentions. That circumstance made the ordinary tasks of gathering in assets and communicating with beneficiaries much simpler than what might otherwise be the case for an executor.
Remuneration denied for tasks unnecessary to the estate’s administration
Mrs. Isherwood also claimed executor’s remuneration for tasks that were not necessary to the estate’s administration. For example, Mrs. Isherwood claimed executor’s remuneration for making funeral arrangements, preparing comments and attending a memorial for the deceased, even though Ms. Le Gallais stipulated that there should be no funeral or memorial service. Mrs. Isherwood may have chosen to do any of those things as the deceased’s friend, but these steps did not advance the estate’s administration or the beneficiaries’ interests. Properly included were tasks such as setting up a brokerage account to redeem shares found in the safety deposit box, conducting various banking steps including the opening of an estate account, and organizing documents for the preparation of income tax returns.
Reviewing legal fees charged to the BC estate
In determining the appropriate remuneration, the Court will consider legal fees charged to the estate where such fees relate to work that ought to have been undertaken by an executor. The Court found that many of the services described in the legal bill were neither reasonable nor proper for conducting a solicitor’s estate-related work. Some of the services charged were more properly characterized as executor’s work and indeed, even duplicated such work. Other steps described in the bill were simply unnecessary for the estate solicitor to undertake. Examples of this unnecessary and/or duplication or assumption of executor’s work included Mrs. Isherwood “taking instructions” from herself as executor; preparing letters to the deceased’s friends and cousins (except for the limited purpose of the probate application); time spent photocopying documents; and communications with financial institutions, MSP, periodical providers, charitable institutions (other than the beneficiaries), and the life insurance provider. The necessary and proper work required by the solicitor with respect to this estate amounted to commencing and concluding the probate process, preparing the estate accounts, and communicating with the named beneficiaries regarding these processes.
Bottom line on executor’s remuneration
Where the Will contains a charging clause, the executor is to be paid separately in both professional and executor capacities. However, executor remuneration must be fair and reasonable, and is not to include double-dipping or charges for work unnecessary to the administration of the estate.