WHEN IS AN ACCOUNTANT ENTITLED TO BE REMUNERATED FOR EXECUTOR DUTIES?
01/03/2013
Employing someone to do executorial work can only be justified if the employment of that professional was reasonable and permitted by the charging clause of the Will, by the Court, or is approved by the beneficiaries
In the case of Chick v Grosfeld [2012], the Court decided that the fees charged by an accountant executor were wrongly charged.
The deceased, Barry Chick appointed his accountant Johannes Grosfeld whom he had known for a number of years, as the executor of his Will. The Will included a fairly lengthy “charging clause”. A key issue decided in the case was whether the clause authorised Grosfeld to charge professional fees at his usual hourly rate for all work done in relation to the estate, and in particular, whether he could charge for non-professional work.
Grosfeld paid himself over $180,000 for his executorial duties, a sum described by the Judge as “an enormous amount of money for an executor to charge” given the size and nature of the estate, and the tasks that needed to be carried out.
As the charging clause in Chick’s Will specified that the executor could only charge for work “in connection with the trusts of the Will”, the Judge ruled that Grosfeld was not entitled to charge his hourly rate for the 57 hours of time spent on seeking the beneficiaries’ agreement on the disposal of the deceased’s ashes, as this was not work in connection with the trusts of the Will.
However, the Judge determined that work done by the executor in the collection and investment of assets, the payment of legacies, payment of debts, the defence of family provision claims and the defence of challenges to the will, was work done in connection with the trusts. It was however, left up to “the Registrar on the passing of accounts to determine how much Grosfeld was entitled to charge the estate for his services as an accountant that would be a proper disbursement if the executor had retained an accountant for the purposes of providing professional services”.
The executor in this case also failed in his duties as an executor in a number of other areas, including failing to provide the beneficiaries with information, failing to pay liabilities of the estate and mixing funds from estate with his own money. As a result, the Judge determined that the executor was not a fit and proper person to continue to act, and since the executor’s conduct put the estate funds in jeopardy, the grant of probate was revoked and a new executor was appointed.
In deciding the case, the Judge identified some key principles regarding an executor’s entitlement to be paid remuneration in a professional capacity. These included the following:
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An executor is only entitled to remuneration of executorial functions if:
- allowed by the Court;
- allowed by a charging clause in the Will; or
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approved by beneficiaries.
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For a professional executor to be paid for non-professional work, the charging clause must expressly allow the payment.
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Typical phrases included in clauses permitting payment for non-professional work would be “charges for all work done”, charges for work “whether in the ordinary course of profession or business or not” or charges for “time and trouble”. An example of non-professional work would be when a solicitor does non-legal work or an accountant does non-accounting work.
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Where the charging clause only provides for an executor to charge for professional work, it would be work for which a lay executor would be justified in retaining a professional person to act for the benefit of estate, eg for an accountant to complete tax returns or a solicitor to be retained to act on a conveyance.
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Beneficiaries need to have capacity, be informed and not be conflicted in order to approve an executor’s remuneration.
As there are a various types and classes of charging clauses that can be included in a person’s Will, a professional appointed as an executor needs to fully understand the scope of what can be charged under the Will before deciding to seek payment from the estate.
For more information on this article, and in drafting or interpreting charging clauses in Wills, please call Townsends Lawyers on (02) 829 66 222