Tuesday, March 03, 2009

Executor Fees: Morrison Estate

In British Columbia, section 88 of the Trustee Act provides that the court may award a trustee, executor or an administrator a fair and reasonable allowance not exceeding five percent of income and capital of an estate as remuneration. This applies unless a contract, will or trust agreement fixes a different amount (which may exceed five percent). There is also a provision for an annual care and management fee not exceeding 0.4 % of the average value of the assets in each year.

Some executors or other personal representatives may be under the mistaken impression that they are entitled to five percent. If all of the beneficiaries are capacitated adults, they may consent to five percent, but in cases where the court determines the executor’s remuneration, the awards are usually below five percent.

A recent decision of Master Young, in Re Morrison Estate, 2009 BCSC 217, illustrates some of the factors the courts consider when determining remuneration.

In his will, Arthur Leslie Morrison appointed his son Arthur Leslie Morrison Jr. as his executor, and divided his estate equally among all of Arthur Morrison’s four children.

Arthur Morrison Jr. had a good relationship with one of his sisters, but not with his other two siblings. When he distributed the estate, he deducted certain amounts for debts he claimed two of his siblings, Robert Morrison and Gail Yochim, had owed his father. He also took a fee equal to five percent of the value of the estate. He sent his siblings cheques and releases. The two siblings receiving a lesser share cashed the cheques, but did not sign the releases.

Arthur Morrison Jr. passed his accounts before Master Young. A passing of accounts is a hearing before a Supreme Court of British Columbia Master or Registrar in which executor’s accounts are reviewed, and the court may recommend or determine the amount of the executor’s remuneration.

Arthur Morrison Jr. argued that because his siblings cashed their cheques, they were not entitled to challenge his accounts. Master Young rejected this argument.

Master Young found that Robert Morrison did owe his father some of the amount that Arthur Morrison Jr. deducted from his share, but not all of it. She also found that Gail Yochim was not indebted to her father at his death.

Because the will did not fix the amount of the remuneration (although it did allow Arthur Morrison Jr. to take remuneration before court approval), section 88 of the Trustee Act applied.

Master Young found that the estate administration was relatively simple. The estate consisted primarily of term investments at two banks. “Minimal work was required by the executor to gather the assets and to distribute them.”

The value of the estate was about $486,000.

Master Young found that the executor exercised skill and ability below an acceptable standard. He did not administer the estate in a neutral, balanced manner among the beneficiaries. He became involved in ongoing disputes with two of his siblings. When they questioned his accounts, he took the unreasonable position that because they cashed their cheques, they were not entitled to further information.

Master Young fixed Arthur Morrison Jr.’s remuneration at two percent of the value of the estate, being the sum of $10,059. He is required to reimburse the estate for $14,275 in respect of addition fees he paid to himself out of his father’s estate.

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