Hey there, time traveller!
This article was published 16/7/2008 (3105 days ago), so information in it may no longer be current.
Gerald Conner died in Ontario on April 26, 2004, and named his brother, Marvin, to be the executor of his estate.
Gerald's will divided his estate in equal shares among four of his siblings. That included Marvin, the executor, his sister and two of his brothers. The estate was worth over $500,000 and each of the beneficiaries could expect to receive approximately $125,000 after the dust settled. Each share would be reduced by the costs of administering the estate.
Marvin got a good start on that. Within three months he had a probate order from the court confirming his authority as his brother's executor. He had also made good progress in turning the estate into cash.
The wheels came off when Marvin mentioned to his siblings that he wanted to be paid a fee for his services as executor. He proposed a fee of $25,000.
His siblings said that the estate was a family matter and a fee was not appropriate. One of them tried to soften that by suggesting to everyone that a fee of $3,000 or $4,000 might be acceptable.
Marvin told them that their dead brother was the one who suggested the $25,000 fee. He said he would give the fee to a charity if that made them happier.
They were not happy at all. They started asking their brother to justify every decision he made, and to provide copies of every piece of paper coming in and going out during estate administration. Gerald resisted the demands for information. That made the beneficiaries suspicious, and more demands were made. Lawyers were hired. Administration of the estate slowed to a crawl because of all of the bickering.
The bad feelings boiled over when the family was forced to go to court to fight over the fee. The court approved a fee of $9,252.45. Gerald would have been unhappy because the fee was reduced. His siblings would have been unhappy because the fee was too big. Two lawyers were happy - they were able to bill the estate for a one-day hearing.
The real cost of the hearing is measured in bad blood. It is unlikely that Gerald is still invited to Christmas dinner with his brothers and sister.
This story is a true one, taken from the published decision of the court. Names were changed to save the family embarrassment.
How do you avoid a fight like this over your estate?
Some people write in a specific dollar amount into the will for the executor's fee ("give Bill a fee of $20,000 for acting as my executor"). Unfortunately, what sounds like a reasonable fee when you write your will, may not still be a reasonable fee when you eventually die. It can be too high, or too low.
A formula might be used instead ("give Bill a fee equal to two per cent of the value of my estate"). This has the advantage of having the fee climb and drop with the size of the estate. Drawback? It is surprising how often people can fight over the math, and two per cent may not be the right fee if your estate turns out to be more complex than you thought it would be.
Most clients trust their family not to fight, and leave the fee issue to be worked out after they are gone. That allows the fee to be tailored to the size and complexity of the estate, and to the amount of time the executor is actually forced to put in.
It is often a good idea to have a discussion with your heirs and your executors. If Gerald had called a family meeting he could have talked this through before he died.
If you think your family is still likely to fight, then consider appointing someone other than a family member to be your executor.
Next month's column: How much is an executor entitled to take as a fee?
John E. S. Poyser is a lawyer with the Wealth and Estate Group at the Winnipeg firm Inkster, Christie, Hughes LLP. Contact him at 947-6801 or by e-mail.