Sunday, September 27, 2009

Executor Fees May Not Reflect Time Opposing a Wills Variation Act Claim

Master McCallum’s decision in Re Estate Hautakoski, 2009 BCSC 868, reflects two important points for executors. First, if a spouse or child brings an application in British Columbia under the Wills Variation Act to vary the will, the executor ought not to take an active role in opposing the claim. Secondly, although section 88 of the Trustee Act in British Columbia provides for a ceiling on executor’s fees of 5 percent of the estate capital and income, as well as an annual care and management fee of up to 0.4 percent of the average value of the estate assets, the executor’s entitlement is often found to be less than the ceiling. The law allows a reasonable amount, which is not necessarily the maximum.

The executor of Veikko Tapani Hautakoski’s will was his lawyer. Mr. Hautakoski disinherited his son, Harry Hautakoski, leaving his estate in a trust for his granddaughter. Harry Hautakoski brought a claim to vary the will under the Wills Variation Act on the basis that adequate provision had not been made for him. Veikko Hautakoski’s granddaughter did not oppose the Wills Variation Act claim.

The executor did oppose Harry Hautakoski’s claim. She wanted Veikko Hautakoski’s wishes as set out in the will carried out.

The Wills Variation Act claim was ultimately settled by an agreement and consent order that Harry Hautakoski would receive one-third of the estate, with one-third given to the granddaughter at the age of 25, and the rest held in trust for her.

The executor asked the beneficiaries to approve her accounts. She sought 5 percent of the capital and income of the $1.1 million estate, as well as an annual care and management fee. She estimated that she spent 150 hours on the file, much of which related to opposing the Wills Variation Act claim.

The beneficiaries did not approve of the amount of the fees, and took issue with the role she took in opposing the Wills Variation Act claim.

After quoting from the decision of Mr. Justice Bouck in Quirico v. Pepper (Estate) that the executor’s role is to remain neutral in a Wills Variation Act claim, Master McCallum wrote:

This executor went well beyond that role because she was concerned that the testator’s wishes would not be followed. There is no doubt that ought not to have been her concern. She was required to maintain an even hand as between the beneficiaries and take no position on the merits of the claim. If this executor had followed that course, the time spent by her would undoubtedly have been reduced.
Master McCallum found that in other respects, the executor handled the estate competently, but that it would not be appropriate to award the maximum amounts in the Trustee Act. He wrote:

[17] The beneficiaries took no issue otherwise with the executor’s discharge of her duties. This was an estate involving over $1,000,000 in assets. There was a reasonable level of care and responsibility required of the executor who displayed an acceptable level of skill in dealing with the assets. The estate was competently managed and the executor should be fairly compensated for her work. There is no evidence as to the time required to administer the estate as distinct from the WVA

[18] The executor’s claim includes a capital fee of the maximum allowable 5% of the gross value of the estate. Given that the estate is not fully distributed and that there is a trust remaining for the testator’s granddaughter, the maximum fee cannot be allowed. In the other circumstances of the estate, the maximum fee would also
not be appropriate. Taking into account all the criteria to be considered, a proper fee on capital for this estate would be 2% of the gross value of the estate. I calculate that fee at $22,370.38 (2% x $1,118,511.90).

Master McCallum did allow 5 percent of the income, and a care and management fee of 0.3 percent annually.

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