New laws clarify executor commissions during estate administration

Solicitors and other professionals who act as executors of deceased estates need to be aware of recent law changes which clarify when commissions can be charged for administering an estate.

On 1 November 2017, the Administration and Probate and Other Acts Amendments (Succession and Related Matters) Act 2017 came into force in Victoria. This Act amended the Administration and Probate Act 1958 (the Act) in relation to intestacy, ademption, and the focus of this article, executors’ commission and fees.

The starting point

Executors and administrators of deceased estates do not have an automatic right to receive commissions and are expected to act gratuitously. This is the case unless:

1. the Will specifically contains a clause granting payment of a commission and the willmaker gave written informed consent to the inclusion of the clause before executing their Will; or
2. the beneficiaries of the residue of the estate give the executor or administrator their fully informed consent to the payment of the commission, provided the beneficiaries are under no legal disability (such as being under 18 years of age); or
3. the executor or administrator makes an application to the Supreme Court of Victoria and obtains an order to be paid a commission for their ‘pains and troubles’ in administering the estate.

Remuneration clauses contained within a Will

A person’s Will may contain a clause entitling the executor to receive a commission for administering the estate. However, merely including the clause in the Will does not automatically entitle the executor to receive a commission. The new section 65B of the Act requires the willmaker to take further steps in and around the time of executing their Will to allow the executor to rely on the clause entitling them to receive commission. The willmaker must:

1. give written informed consent to the inclusion of the remuneration clause in the Will; and
2. give the written informed consent before executing the Will.

If the willmaker does not take these further steps, the executor of the Will must either obtain the ‘informed consent’ of the interested beneficiaries (provided they can legally give consent), or apply to the Supreme Court in order to receive commission.

Commission or fees

The new section 65E now provides that if the Will includes a clause allowing an executor to charge commission, the executor can instead elect to charge fees for executorial services instead, provided the fees are:

1. less than the amount of commission that the executor would have been entitled to;
2. calculated at a rate that does not take into account any specialist professional skills of the executor; and
3. distinguished from any fees charged for professional services.

Reduction of excessive commission or fees

The new section 65A allows any person interested under a Will or estate, including interested beneficiaries or creditors of an estate, to apply to the Supreme Court to review excessive commissions and fees.

The Court can order that the fees or commissions charged by, or paid to, the executor be repaid to the estate if they are considered to be excessive. This includes costs, expenses or disbursements for which an executor has been reimbursed by the estate, such as for valuations of estate assets, legal fees, accountants’ fees, or storage fees incurred for housing estate assets prior to distribution.

Conclusion

These changes to the law need to be reviewed and followed by those who take on roles acting as executors and administrators of estates, particularly if their usual practise is to seek payment for their work by way of commission.

Rigby Cooke’s Wills and Estates team can advise you about seeking payment by way of commission for acting as an executor or administrator and navigating the new legislative regime.

This article originally appeared in the Summer 2017 edition of InSuccession. Other articles in this newsletter included:

• Your responsibilities as a financial attorney or administrator – a snapshot of do’s and don’ts
• New benchmark set for all estates to be treated equally
• Estate planning advice for same-sex couples getting hitched