Changes to Remuneration for Executors & Administrators - Court now has the Power to Review

Thursday November 30, 2017

Changes to Remuneration for Executors & Administrators - Court now has the Power to Review

Recent changes to the Administration and Probate Act 1958 came into effect on 1 November 2017 and impact the way all executors can charge fees and commissions for estates.

Some of the changes impact Wills made after 1 November 2017, and some impact the estates of people who die after 1 November 2017, irrespective of when the Will was made.  The overall impact of the changes is that the Court is now empowered to scrutinise the way executors and administrators of estates charge their fees and commissions, whether or not those executors are professionals, such as solicitors or accountants, or a family member.

What are the changes?

  • The Court can review commissions, fees and expenses

    • For all persons who die on or after 1 November 2017, the Supreme Court is entitled to review and reduce fees, charges and commissions charged by executors and administrators of their estate, including any disbursement or expense for which the executor claims reimbursement.
    • The Court can decide to carry out such review (e.g. where an unrelated application has been brought before the Court, such as a Testator’s Family Maintenance Claim), or an application can be made by an interested party such as a beneficiary or creditor.
    • The Court’s power applies even if the Will fixes the commission.
  • Informed consent of a will-maker

    • For all Wills executed on or after 1 November 2017, an executor cannot be paid under a remuneration clause in a Will unless the will-maker gave informed written consent to the clause before the Will was executed.
  • Consent of beneficiaries

    • For all Wills executed on or after 1 November 2017, an executor can be paid a commission or fee in the absence of a charging clause if:
      • All beneficiaries have full legal capacity (i.e. are 18 years or over and do not suffer from any impairment that might impact their ability to make reasonable decisions);
      • Relevant information about the beneficiaries’ rights in relation to the estate, commission and fees has been provided to them; and
      • They have provided their informed consent.
    • Executors can charge fees in lieu of commission
      • Fees can be charged in lieu of commission if:
        • The fees are less than any commission amount;
        • The fees are not charged at a professional rate; and
        • The fees are distinguished from any fees charged for professional services.

What are the practical implications?

The impact of these changes is wide-reaching; it will impact not only lawyers who frequently act as executors but any other professional or lay person who takes on this role and is expecting to receive a fee or commission.  Special care must be taken to ensure that informed consent to commission or fees is given by either a will-maker at the time the Will is prepared and an appropriate charging clause included in the Will, or informed consent is obtained from the beneficiaries of the estate upon death.  The legislation sets out in detail the information that must be provided to beneficiaries, but does not set out what information must be provided to will-makers.

Bear in mind that even if informed consent is given (by either a will-maker or beneficiaries), the Court may still seek to review the fees, commissions or expenses for which the executor seeks to be paid.

Practically speaking, it will be interesting to see how the Court exercises its powers in scrutinising expenditure by executors, such as funeral and memorial expenses. Previously, these were expenses for which an executor could reasonably expect to be reimbursed irrespective of the arrangements made. Moving forward, executors should take care in ensuring that expenditure from the estate is reasonable and warranted having regard to the size of the estate, the wishes of the family and any expressed wishes of the deceased.

For further information or clarification about how these changes might impact you, please contact our Lachlan Vallance on 9629 7411.

(This article was originally written by Hayley Hunter.)