Estate Group update: Fees and commissions in estatesNov 30, 2017
On 1 November 2017, the Administration and Probate Acts Amendment (Succession and Related Matters) Act 2017 came into effect. One of the key issues the Act sought to address relates to the fees and charges of all executors and administrators of estates, regardless of whether they are solicitors, accountants, financial advisors or non-professionals. Notably, the Act does not apply to State Trustees or a licensed trustee company as they are already regulated by other legislation, and are already required to give details of their charges for executorial work.
The changes apply to all wills signed after 1 November 2017 and to some executors and administrators in other circumstances.
Executor remuneration requires authorisation
The Act clarifies that an executor is only entitled to remuneration or commission if authorised by any of the:
- will and the will-maker — having given informed consent to the inclusion of the charging clause before the will was signed;
- beneficiaries — if all beneficiaries have given informed consent to the basis on which the executor is to be paid (being either a commission or percentage of the assets of the Estate or by charging fees,) the estimated amount and the beneficiaries have been notified of their right to object to or ask the Court to review the application; or
- Supreme Court of Victoria.
The Supreme Court of Victoria also has the power to review and reduce the fees, charges or commissions charged, including any claim for reimbursement of expenses.
An application to the court for commission is normally made after the assets of the estate have been collected in and the debts paid, just before the final distribution of the Estate.
The application must set out the details of the estate (i.e. the assets and liabilities, income and payments, beneficiaries) and the 'pains and trouble' incurred in managing the estate. Pains and trouble refers to the responsibility, anxiety and worry of the executor in regard to executorial duties (the pain), and the actual work done (the trouble).
The Act limits the amount of commission which may be awarded to no more than 5% of the gross value of the estate. In practice, it is very unusual for an executor to be awarded 5% — only an administration of a very large and complex estate which requires substantial levels of skill and judgment, would merit such an award.
It is also important to note that an award for commission is taxable income that the executor needs to declare and if there is more than one executor, commission may be awarded to only one executor or shared between them.
To discuss any of the information contained in this update, please contact our Estate Group on (03) 8600 8885.
Note: This update is a guide only and is not intended to constitute legal advice.