When is an Executor Entitled to be Paid?

Co-authored by Elise Croft, Partner (previously with Kott Gunning Lawyers)

Anyone who has ever been appointed executor or administrator of a deceased estate (Executor) would agree that administering the estate is a task which can take considerable time and effort, particularly in circumstances where the family situation is acrimonious.

Where an executor is an accountant, a solicitor or a trustee company there is a clear path to remuneration for the task.  This makes sense when the professional qualifications of the executor are directly relevant to the day-to-day administration of the estate.

The situation is entirely different for the greater majority of executors, namely lay people who lack qualifications directly relevant to the tasks at hand.  These executors often need to take time off work to meet their duties, particularly when the estate is contested by a family member asking for further provision under the Family Provision Act.  To add insult to injury, the task becomes truly thankless when one considers that there is no automatic right for a lay person to be remunerated for their time and effort. Such executors must make a special application to the Supreme Court of Western Australia for permission to pay themselves from the estate.  These applications are not cheap, as they require the executor to lead affidavit evidence regarding the entirety of the administration.  Such applications need to be made close to the end of the administration, so the lay executor always bears the burden of the time spent administering the estate without guarantee of any return.

In considering an application for remuneration, the Court will look closely at how the executor conducted themselves when administering the estate.  If the Court considers that there has been any positive fraud or dishonesty, remuneration will not be awarded.  If the executor has engaged in some kind of improper conduct which falls short of actual fraud or dishonesty, remuneration may be granted but “adjusted” downwards to take account of the improper conduct.  If the executor leads evidence of particular “pains and troubles” they encountered when administering the estate the Court will essentially value each item of “pain and trouble” to determine the appropriate amount of remuneration.

The maximum amount able to be claimed is 5% of the gross value of the estate, but that amount will only be awarded in circumstances where:

  • there have been substantial difficulties associated with the administration, or
  • the estate has benefited significantly from the executor’s involvement.

In the Western Australian case of Atkins v Godfrey[1], Peter Godfrey as executor of the estate of Robert Charles Godfrey applied for remuneration. Mr Godfrey submitted that he should be paid $71,571 for his services. The estate was worth about $3.3 million and consisted of three properties, furniture, household effects, shares, life insurance policies, bank accounts, a car and some small debts.  The executor gathered in the assets of the estate and paid the debts of the estate.  He was also required to participate in a claim made by the alleged de facto partner of the deceased under the then Inheritance (Family and Dependants Provision) Act (now the Family Provision Act), which was settled within a relatively short period of nine months. The affidavit submitted by Mr Godfrey in support of his application showed that he had spent about 210 hours administering the estate.

The Court determined that Mr Godfrey had rendered substantial services in the administration of the estate and was entitled to be remunerated. However before fixing the amount of that remuneration the Court considered whether Mr Godfrey’s conduct was such that the remuneration should be reduced. There were two issues:

  • The Court noted that Mr Godfrey had failed to scrutinise the invoices rendered by the solicitor he engaged for the estate, which resulted in the estate paying legal fees in excess of the tasks which should had been undertaken by the solicitor. Whilst the excess legal fees were eventually refunded to the estate, the estate suffered a loss in the form of interest it would have earned on the amount of money overpaid in legal fees. The Court determined that Mr Godfrey’s lack of diligence in failing to scrutinise the solicitor’s invoices was sufficient to reduce the remuneration.
  • The Court also considered Mr Godfrey took longer than he should have to finalise the estate, another factor sufficient to reduce his remuneration.

The Court determined the sum of $19,759 was just and reasonable to remunerate Mr Godfrey for his services – a sum which equated to about 0.6% of the value of the estate.  In his decision Justice Le Miere stated that, but for the above matters, he would have allowed commission in an amount slightly more than $20,659.

The costs incurred by the executor and the defendants (who were the beneficiaries of the estate) in the application were also paid out of the estate – a standard costs order for this type of application.

The greater majority of executors are lay people lacking professional qualifications relevant to the administration of estates.  If you find yourself as one of these types of executors it is advisable that you seek advice on the possibility of remuneration as soon as possible, particularly in circumstances where the estate is likely to be tricky or you become embroiled in a Family Provision Act claim.  As can be seen from the above case, there can be steps you unwittingly take when administering the estate that could have a bearing on the amount of any remuneration you ultimately receive.  Knowing the pitfalls at the commencement of the administration can arm you with the knowledge necessary to maximise your chance of recovering something for the countless hours you could spend managing a particular estate.

There are also certain circumstances in which you can properly delegate particular tasks necessary for the administration of the estate.  For example it may be appropriate to engage a contractor to clean the deceased’s house before sale.  The contractor’s costs are automatically recoverable from the estate as a testamentary expense and you will not have to devote your valuable time to that task.  This is an obvious example of delegation, but there are a myriad of other circumstances in which certain tasks may be delegated to keep your time commitment as limited as is possible.

For more information about this Update please contact  Claire Hawke-Gundill on (08) 9321 3755. 

The information published in this paper is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.

[1]  [2006] WASC 83.