The purpose of this paper is to examine remuneration in estate matters for both executors and lawyers, and in the course of that discussion, review some of the ethical issues that befall those charged with administering estates.
A. Compensation of Executors and Trustees
1. Common Law
The common law rule is that a personal representative can only rely on an agreement or other instrument for remuneration, otherwise the personal representative cannot recover compensation for the time and effort spent in administering the trust. This is still the law in England today.
Until 1858, it was a general principle at law and in equity that unless a personal representative could rely on am agreement or other instrument for remuneration, the personal representative could not recover compensation for the time and effort expended in administering the trust.
2. By Instrument
As suggested then, remuneration for am estate trustee can be fixed by instrument. In the Will itself, the testator could provide for compensation to the executor. However, special note should be made of S.90(5), The Trustee Act, LRM 1987, c. T160,which states that any agreement, instrument or document executed by a testator or any person on his behalf fixing the amount of compensation or allowance that may be paid to a trustee, guardian or personal representative with respect to the administration of the estate of the testator, is not valid unless it is approved by a Judge.l (see Appendix A).
In the Estate of Sydney Robin Katz (1995),106 Man R (2d) 270, Master Lee considered written provisions made by a testator for compensation payable in respect to the administration of an estate (see Appendix B). The wording is found at the bottom of page 2, Article 5.05. Master Lee held that it was the testator's intent to provide that Mr. Labinsky be compensated at his professional rate for all of his services/time spent in connection with the administration of the estate, professional or otherwise. But see Master Lee's comments at the bottom of page 5 of that decision, where he held that Article 5.05 is not binding and subject to review by the Court, and that the Court must apply the same considerations it applies in considering any request for compensation.
See also Neilsen v Domko
and Niemczyk, a decision of the Manitoba Court of Queen's Bench (Winnipeg
Center) at PR-88-01-10784 (at Appendix C).
3. By Statute
In Manitoba, compensation for executors and trustees is authorized by statute. Section 90 of The Trustee Act provides the statutory authority for the compensation of personal representatives (see Appendix A). In particular, Queen's Bench Rule 74.12(7) provides that upon a passing of accounts the Court may fix the compensation made to the executor under a Will.
Practice has it that fees payable to an executor for administering an estate are generally based on a fixed percentage of the aggregate value of the estate. At Appendices D and E, respectively, are copies of the fee schedules that are currently used by both the Public Trustee in Manitoba and Royal Trust in administering estates. Royal Trust indicated that the fee schedule that it uses is not cast in stone as each situation is unique and is dealt with based on its complexity and the work required to administer the estate.
Percentages are to be used as a guide only, and the Court will look at both the responsibility and actual work done by the executor in considering the quantum of compensation (See Re Atkinson Estate,  OR 688 and Re Turley Estate , 16 WWR 72).
In the Estate of Rene Raulin, a Manitoba Court of Queen's Bench decision at PR-90-01-21052 (Winnipeg Center), the Public Trustee requested compensation of $16,451.69, which was based on a calculation of a percentage of income and capital received and disbursed, and on an annual asset management fee of 3/5 of 1 % of the average value of the estate. Senior Master Goldberg held that in the circumstances of that case, the proposed compensation was not reasonable, considering the estate consisted of Canada Savings Bonds, a bank account, and a GIC. The Public Trustee's fees were fixed at $5,000.00, after the Court considered additional factors including the time spent administering the estate, the responsibility, and any problems in the administration (see Schedule "A" to the unreported decision at Appendix F). See also, for a further example, Estate of Harry Malanchuk, a Manitoba Court of Queen's Bench decision at PR-93-01-29693 (Winnipeg Center), a copy of which is at Appendix G.
The conduct of a personal representative in the administration of an estate can have an impact on the compensation payable to that person. In Compensation for Estate Trustees, Jennifer Jenkins cites a number of examples of personal representatives acting improperly:
(i) pre-taking of compensation;
(ii) breach of trust;
(iii) failure or delay in filing tax returns resulting in payment of interest or penalties;
(iv) failure to obtain appropriate value upon the sale of an asset;
(v) failure to treat beneficiaries with an even hand;
(vi) loss of interest;
(vii) improper payments;
(viii) conflict of interest; and,
(ix) failure to generally discharge duties as an estate trustee.2
Each of these improper acts by an executor can result in, among other things, the compensation being claimed being reduced by the Court, or the executor being required to remedy a loss by contributing funds to the estate to compensate for the loss occasioned by their misconduct. The Manitoba Court of Queen's Bench decision, Sigfusson v. Gawryluk and Carpenter, at PR-92-0128154, shows what can happen when an executor acts in a conflict of interest in administering an estate (see Master Bolton, Q.C.'s comments, at page 9, at Appendix H)
B. Remuneration of Lawyers
Court of Queen's Bench Rule 74 determines the fees that a lawyer retained by a personal representative of an estate can charge the estate (see Appendix I). A copy of Form 74AA is attached to this paper at Appendix J. Rule 74.14 sets out a Tariff of Fees which is to be applied to all estates for probate or administration. Fees and costs do not include disbursements or remuneration to which a solicitor may be entitled as a personal representative (Rule 74.14(2)).
The fee payable to the lawyer retained by the personal representative, where the personal representative is not a lawyer, trust company, or the Public Trustee, is:
- 3% of the first $ 10,000.00
or part thereof of the aggregate value of the estate;
- 2% of the next $90,000.00 or part thereof;
- 1% of the next $200,000.00 or part thereof; and,
- additional fees may be charged on the excess over $300,000.00, depending upon the time spent, complexity of the matter, results achieved, and the value of the estate (Rule 74.14(4)).
"Aggregate value" of the estate is defined as the total value of all assets of the estate as shown in the Application for Probate or Administration or any amendment thereto (Rule 74.14(3)). "Aggregate value" has been defined as the value of assets at the time of death3 and do not include:
- gifts made inter
- property held in joint tenancy,
- insurance, annuities and pensions not payable to the estate, or
- benefits payable under the Canada Pension Plan.
Where an amendment is filed to correct the value of an asset listed in the initial inventory, the lawyer should file the amendment and base the fee charged on the amended value of the assets.4
2. Additional Fees
A lawyer is entitled to receive payment or additional fees in the following circumstances:
- Court appearances as allowed
by the presiding Master or Justice;
- services required to pass the accounts of the personal representative the first time:
(a) where the lawyer has kept the estate accounts and prepared them for passing, fees allowed are based upon the following scale:
(i) 3/4 of 1% on the first
$10,000.00 or part thereof;
(ii) 1/6 of 1% on the next $190,000.00 or part thereof; and,
(iii) 1/10 of 1% on excess over $200,000.00, subject to the Court's discretion on passing of accounts;
(b) where the personal representative has kept the accounts and prepared them for passing, or for services required on any subsequent passing of accounts:
in such amount as may be allowed by the Court on the passing of accounts;
- acting on the sale of an
estate asset; and,
- finding a purchaser for an estate asset.
Rule 74.14(5) allows for a lawyer's fees on acting for persons other than the personal representative, attending on an assessment of costs of the lawyer acting for the personal representative, or on a passing of a personal representative's accounts, as may be allowed by the Court.
Costs, including disbursements, may be ordered by the Court from the estate generally, or from funds belonging to any beneficiary, heir or interested person (Rule 74.14(17)).
3. Estates Over $300,000.00
Rule 74.14(4) permits additional fees on estates in excess of $300,000.00. The amount of additional fees chargeable depends on the time spent, complexity, results achieved and value of the estate. Not all estates in excess of $300,000.00 will justify additional fees (see Estate of Harry Malanchuk at Appendix G). However, in order to justify additional fees, it is recommended that lawyers keep detailed time records. If the lawyer cannot provide the Court with a detailed statement of account, it may not be possible to persuade the Master or Justice that additional fees are deserved.
4. Acting as Solicitor and Executor
Where the lawyer does the
work of an executor, additional fees may be allowed. Further, the lawyer
will be entitled to be paid for any additional legal services provided
which are not
contemplated under the tariff. However, when acting as both solicitor and executor, Rule 74.14(5) restricts the fees allowable for work done as a lawyer to 40% of the fees allowed under the tariff in Rule 74.14(4).
In administering estates, most lawyers will have performed some duties normally expected of the executor, but this does not mean that the lawyer who does so should expect to be paid over and above the tariff amount. Lawyers should seek compensation under Rule 74.14(5), i.e. 40% of the tariff, and then seek additional payment for executor services if the time spent justifies it. A good example of this is in the case Krawchuk v. Ciastio (1993), 90 Man R (2d) 69 (Man QB), at Appendix M. However, the lawyer should get the executor's instructions to perform the additional services or risk not being paid for them.
5. Disputed Matters
Fees that are allowed a lawyer
in estate matters that are disputed are governed by Rule 74.14(16). It
is the presiding Justice that decides "to allow such fees as the Court
deems adequate". The difficulty that arises is having additional fees approved
where the disputed matter settles prior to a hearing. The lawyer must either
have the fees approved by the Court or have the consent of all beneficiaries
to the additional fees. These fees should not be taken prior to Court approval
or the consent of all beneficiaries, as any arrangement made is reviewable
by the Court and may not be accepted. In Buhr Estate v. Buhr (1993),
90 Man R (2d) 118 (Man QB), the Court decided that the fees were not properly
payable by the estate and denied the payment of legal fees and their recovery
from the estate (see Appendix N).
1. Form 74AA
Queen's Bench Rule 74 requires
that Form 74AA be sent to both the personal representatives and residuary
beneficiaries within 60 days of Letters Probate or Administration being
granted. There can be consequences to the lawyer should he or she fail
to do so (see Sigfusson v. Garyluk and Carpenter at Appendix H).
2. Law Society Practice Directions
At Appendix O are copies of all Practice Directions issued by the Discipline Committee of the Law Society of Manitoba respecting estate matters.
At Appendix P are copies
of some decisions of the Discipline Committee regarding lawyers and estate
practice. In Besko, the member pled guilty to all of the charges, and was
found guilty of professional misconduct. In Ross, the lawyer charged fees
in excess of that provided for under Rule 74.14(4) without receiving the
consent of the beneficiaries. He was found guilty of professional misconduct.
3. How Fees Are Reviewed
(a) Interested Persons Defined
Rule 74. 14(10) defines interested
persons to include personal representatives, the estate lawyer or lawyer
retained by the personal representative, and any beneficiary whose interest
in the estate is affected by the lawyer's fee (presumably, residuary beneficiaries).
(b) Passing of Accounts or Assessment of Costs
Rule 74.14(6) and 74.14 (7) state that the fees allowed under Rule 74.14 are subject to review by the Court on a passing of accounts or an assessment of costs. The forms to pass accounts start at Form 74V in the Queen's Bench Rules.
If all matters regarding the administration of the estate, except fees, are acceptable to the personal representative and the beneficiaries, accounts do not have to be formally passed to have the legal fees reviewed. To review the legal fees charged by the lawyer for the personal representative, an interested person obtains an appointment for an assessment of costs under Rule 58. The lawyer for the personal representative must then, at least 14 days before the hearing date, file with the Court an itemized Bill of Costs and an affidavit stating that:
he or she has complied with 74.14(4);
(ii) the fees payable under 74.14(4);
(iii) the fees requested;
(iv) whether the fees requested exceed the fees payable under 74.14(4); and,
(v) the reasons the excess fees should be allowed.
When reviewing the fees payable to the estate, the Court looks at the nature of the estate assets compared to the value of the estate, the amount and type of services performed by the lawyer, and any other matters which the Court considers relevant.
The onus, in an assessment
of legal costs, is on the lawyer, not the client. Especially where the
lawyer is seeking compensation greater than that allowed under 74.14(4),
he or she must be able to justify the fees being requested. Having time
records will assist, but the Court must be satisfied that the time spent
was appropriate in the circumstances. See Hienrichs v. Baker, Zivot
& Co. (1995), 98 Man R (2d) 179 (Man QB), Master Goldberg, affirmed
at (1996) 108 Man R (2d) 47 (Man QB). A retainer agreement may also
be helpful to the Court in assessing the legal fees charged.
4. Fees in Excess of Tariff
Fees in excess of the tariff
can only be charged where the beneficiaries have consented in writing or
with the Court's approval. Practically speaking, the beneficiaries can
consent to the excess fees in the form of Release that they sign when the
estate is being wound up. Otherwise, the fees charged by the lawyer for
the personal representative must be in accordance with Rule 74.14(4). See
5. Costs in Estate Litigation
Unlike civil litigation cases, where costs are usually awarded to the successful party, Courts were, until recently, allowing costs to be paid from the estate regardless of the success of the party to the litigation: Orville L. Currie, in his article "Legal Fees and Costs in Estate Matters",5 explains that the reason for the difference was policy considerations. Sometimes, the cause of the estate litigation is the testator, and in those situations the testator's estate should bear the cost. Courts have a responsibility to see that wills are valid, the testator's dependents are supported, and that wills are understood. Courts have, therefore, recognized that a party should not fear the cost consequences when bringing an issue before the Court. However, as indicated above, this position is changing, and the Courts are now looking at the merits of each case to decide whether all costs, including those of an unsuccessful party, are to be paid by the estate. The Manitoba Court of Appeal, in Syrota v Clarke Estate (1993), 83 Man R(2d) 21 (at Appendix Q), moved away from the traditional approach of assessing costs and held that costs should follow the event. The Court did consider two situations where costs should not follow the event. Costs should not be paid by the parties where the circumstances merit investigation or where the testator is the cause of the litigation. In Manitoba (Public Trustee) v Ballen (1992) 76 Man R(2d) 241 (at Appendix R), the Court of Appeal held that awarding solicitor and client costs should only be done in exceptional circumstances and costs paid out of an estate only if the estate benefited from the legal work.
Courts have allowed payment of all parties' solicitor-client costs from the estate when a principle of law has had to be clarified. Costs have been denied where the proceedings were considered unconscionable compared to the amounts at issue.6 Parties have been ordered to pay costs to the estate when a party has been especially difficult. If parties challenging a Will cannot justify their actions, then they will bear the costs.
All of these statements point
out the necessity of the lawyer sitting down with the client and discussing
the merits of the claim being made or position taken and the possible cost
consequences. If the client is insistent on proceeding, then it is especially
important to then make sure that your fees will be covered by the client
up front and not rely upon them being paid out of the estate. To do otherwise,
is to do so at your peril.
I hope that this paper will
be of some assistance to my fellow practitioners dealing with wills and
estate issues and, in particular, that of getting paid. A review of the
cases at the Appendices attached to this paper show some of the ethical
issues that arise in estate matters, and the Court decisions provide some
guidamce in that regard.
O.L. Currie, "Legal Fees and Costs in Estate Matters", 299 Manitoba Law Journal Volume 25 No. 2 - a very thorough article.
B.A. Schnurr, "Estate Litigation - Who Pays the Costs?" (1991) 11 Estate and Trust Journal 52
J. Jenkins, Compensation for Estate Trustees, Canada Law Book
Inc., 1997 - mostly Ontario focused, but still helpful.
I would like to acknowledge
the assistance of Garth Niven of the Great Library for all of his help
and research, to my secretary, Ruth Hutton, who capably read my writing
and typed this paper, and to Brenda Silver, Assistant Director of Professional
Education, Law Society of Manitoba, for her patience in dealing with me
in the production of this paper.
1. J. Jenkins, Compensation for Estate Trustees, 1997, Canada Law Book, at page 1.
2. Supra, at page 159.
3. I,  16 W.W.R. 72 (BCSC) (at Appendix K)
4. Taposchaner Estate v. Ross & Associates, a Manitoba Court of Queen's Bench (Winnipeg Center) decision, at CI-91-01-55228 (at Appendix L).
5. O.L. Currie "Legal Fees and Costs in Estate Matters", Manitoba Law Journal Volume 25 No. 2.
6. See Derksen v Kunkel, et al, Manitoba
Court of Queen's Bench (Winnipeg Center) Suit No. PR 86-01-00696,
J. Krindle, especially at the bottom of page 4 (at Appendix S).