New laws to executor commission during estate administration
NEW LAWS TO EXECUTOR COMMISSION DURING ESTATE ADMINISTRATION
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 has amended the provisions relating to intestacy and executors’ commission and fees in accordance with the Administration and Probate Act 1958 (“the Act”).
These changes are important to any individuals who act as executors or administrators of deceased estates so they are aware of when commissions can be charged for administering an estate.
Executors and administrators of a deceased estate must be aware that they do not have an automatic right to receive commission. This is unless any of the following apply:
The will specifically contains a provision which grants the payment of commission and the will maker (“the testator”) has provided written informed consent for the inclusion of this provision before executing their will (section 65B); or
The beneficiaries of the residue of the state provide the executor or administrator their fully informed consent to the payment of the commission – provided that the beneficiaries are under no legal disability and are not under the age of 18 years (section 65C); or
The executor or administrator makes an application to the Supreme Court of Victoria and obtains an order to be paid a commission for their “pain and trouble" in administering the estate (section 65)
Benefits to executor under remuneration clause
The testator’s will may contain a provision which entitles the executor to receive a commission for administering the estate. However, the mere inclusion of this provision into the will does not automatically entitle the executor to receive a commission. The amendments to the Act have now created a new section 65B to the Act, which requires the testator to take further steps on or around the time they execute their will to allow the executor to rely on the provision entitling them to receive commission. The new section requires the testator to:
Give informed consent to the inclusion of the remuneration provision; and
That written informed consent was given by the testator before the will was executed.
If the testator does not complete the steps required under section 65B, the executor of the will must either obtain the informed consent of the interest beneficiaries or apply to the Supreme Court in order to receive commission.
Consent to executor’s remuneration by interested beneficiaries
The new section 65C provides that an executor of a will may receive fees or commission from the assets of the estate of the deceased person if the executor has obtained informed consent from each interested beneficiary and:
There is no remuneration clause in the will; or
A remuneration clause in the will does not authorise the type of remuneration sought or taken by the executor; or
A remuneration clause does not entitle the executor to remuneration because written informed consent for the remuneration clause was not obtained from the testator in accordance with section 65B.
Furthermore, the new section 65D provides the information an executor must provide to interested beneficiaries should they seek to be paid. The information that is required to be provided are as follows:
The basis on which the executor is to be paid, being either in accordance with:
a clause in the will; or
with the consent of the interested beneficiaries under section 65C; or
an order of the Court made under section 65;
The method of calculation of the payment to be made to the executor, including whether the payment will be:
a commission or percentage of the assets of the estate and, if so, the applicable commission or percentage; or
by charging fees;
The estimated value of the payment to be made to the executor;
The right of any interested beneficiary to have the payment claimed or charged by the executor reviewed by the Court
If an executor of a will becomes aware that there is likely to be a substantial change in the estimated value of the payment to be made to the executor, the executor must inform each interested beneficiary of the change as soon as reasonably practicable.
Sections 65C and 65D do not apply to an executor that is a trustee company.
Executor may elect to charge fees instead of commission
The new section 65E now provides that if the will includes a provision which allows an executor to charge commission, the executor can elect to charge fees for their executorial services, on the basis that the fees are:
Less than the amount to which the executor would have been entitled if the executor had not made the election; and
Calculated at a rate that does not take into account any specialist professional skills of the executor; and
Distinguished from any fees charged for professional services.
Reduction of excessive commission or fees
The new section 65A allows any interested persons under the will or the estate, including interested beneficiaries or creditors of an estate to apply to the Supreme Court to review excessive commissions and fees.
If the Court is satisfied that the amount of either or both of the following commission and/or fees are excessive, the Court may order that it be reduced or repaid to the estate:
A commission or fee charged or retained by an executor or administrator or payable to an executor or administrator under the terms of a will;
Any fee, cost, expense or disbursement for which an executor or administrator has been reimbursed or claims to be reimbursed out of an estate.
Examples of these fees and commission include costs, expenses or disbursements which the executor has been reimbursed by the estate, such as real estate valuations, legal and accountancy fees, storage fees and bank fees.
It is important that these new changes to the law are to be reviewed by individuals who act as executors and administrators to an estate, particularly so to any individuals who wish to seek payment for the work they undertake in administering the estate. In effect will makers will have to approve their executors’ fees and commissions before the draft will is executed. It is conceivable that lawyers who fail to accomplish this could face having to reimburse such executors getting their commission approved or having to reimburse any commission not claimable from the estate. De Marco Lawyers can assist in providing you with the appropriate legal advice relating to the new legislative regime and can assist you should you be an executor or administrator seeking to be paid commission.
This article is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this article without first obtaining specific professional advice.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from De Marco Lawyers and other relevant experts.