Worrall Moss Martin News

Issue 29,  April 2021

When is it appropriate to appoint a lawyer as my executor?

It is common for people with complex estates to appoint a professional executor to manage the administration of their estate, when they die, either alone, or with another person.   It is also common for the beneficiaries of an estate where a professional executor has been appointed, to misunderstand the nature and extent of the work carried out by the executor on behalf of the estate and the fees which are properly charged to the estate.

Given the onerous duties imposed on an executor (particularly a lawyer/executor – who is subject to additional duties and obligations by virtue of their profession), it is critical that a Willmaker carefully consider whether the appointment of a professional executor is appropriate and necessary in their circumstances.   It is equally important that a lawyer, who is asked to be an executor, consider whether it is appropriate that they accept the role, both at the time of drafting the Will, and following the Willmaker’s death.

This issue was highlighted in the case of Re McClung [2006] VSC 209, where the Supreme Court of Victoria found that a lawyer, who had drawn up the Will under which he was appointed an executor, should not have accepted the appointment.

Re McClung - The Facts:   Mary McClung died on 28 December 1999.   In her Will, made in October 1998, she appointed her lawyer and her accountant as joint executors and trustees of her estate.
  • The estate was made up of a house and flat in Victoria, a property in Queensland, a vehicle, and a small amount of money and shares.  The total value of the estate was approximately $580,000.00.
  • In addition to some small specific bequests, the Will provided that Ms McClung’s property in Victoria was to be held on trust for her grandchildren, and the residual estate was to be invested and held on trust.   The income of those investments was to be paid to her daughter, Sally, during her lifetime.   After Sally’s death, the remaining estate was to be shared amongst Sally’s children.
  • In her Will, Ms McClung provided that the lawyer/executor should also act as lawyer to the estate, and be allowed to charge the same professional fees as if he were not also an executor.   In the absence of a clause in the Will providing that an executor may charge fees, an executor is not normally entitled to charge fees for discharging their duties, although they may be entitled to claim a commission once the administration of the estate has been finalised. 
  • Sally, dissatisfied with what she had been left by her mother, commenced proceedings asserting that she was entitled to the Queensland property (outside of the restrictive trust structure), and seeking further provision from the estate.   Sally’s children, and in particular her eldest child, Sarah, opposed Sally’s claim.  Sally’s claim was resolved following a mediation, and the executors proceeded to administer the estate.    
  • At the conclusion of the administration of the estate, both executors made an application to the Supreme Court for payment of commission.   Executor’s commission is a payment that may be made to an executor to compensate them for their pains and troubles in administering an estate.
  • In addition to the claim for commission, the lawyer/executor had charged professional fees for administering the estate, which included his fees for acting in the sale of the estate property, and fees for acting for the estate in the Supreme Court proceedings brought by Sally.  
  • The accountant/executor also charged the estate for services performed.   The Will did not contain any provision authorising those charges by the accountant/executor.
  • No itemised account of those fees was provided by either executor when the fees were billed to the estate, nor to the Court as part of the application for executors’ commission.   No distinction was made in the accounts between fees charged by the lawyer/executor for work undertaken as a lawyer, as distinct from non-professional work carried out in discharging his duties as an executor.   No evidence was put before the Court that the accountant/executor had reviewed the accounts and satisfied himself that they were properly chargeable to the estate, and in fact the Court commented that because the accounts had not been adequately particularised, it would have been impossible for him to be so satisfied.  
The Law - Professional Executor Charges:   The role of executor is a traditionally regarded as a fiduciary role.   A fiduciary is a person who holds a legal or moral duty of trust towards another person.   It is a general rule of law that a fiduciary is not to profit from their position, although there are exceptions to that rule.   In the case of an executor who is also a professional (such as a lawyer), provision can be made in a person’s Will allowing the lawyer/executor to charge their usual fees for professional work undertaken on behalf of the estate after their appointment as an executor.  However, because a clause of that kind is a departure from the traditional “no profit” rule, the Willmaker must be informed at the time of giving instructions for the Will of the risks and costs that are involved in choosing a professional executor.   In very limited circumstances, provision can also be made for a lawyer/executor to charge for their non-professional work as an executor to the estate.   A provision of that kind should provide that the professional executor is not also entitled to claim commission in addition to being able to charge the estate for their time.

The Law - Executors Commission:   The Supreme Court of Victoria has a power under the Administration and Probate Act 1958 (Vic), as does the Supreme Court of Tasmania under the Administration and Probate Act 1935 (Tas), to approve the payment of commission to the persons administering an estate for their “pains and troubles”, up to a maximum of 5% of the value of the estate, although the usual commission approved by the Court is much lower.   It is very unlikely that a Court would approve the payment of commission where provision is made in the Will for a person to charge for their professional services.

Re McClung - The Decision:   After carefully reviewing the costs that the lawyer/executor had already charged for providing legal services to the estate and in resolving the litigation against the estate brought by Sally, the Court dismissed the application for commission, and in doing so criticised the fees charged to the estate by the executors.

Key criticisms included:
  • the accountant charged the estate for his services without being authorised to do so in the Will, and the lawyer permitted him to do so;
  • most of the executorial services were provided by the lawyer (who charged fully, if not excessively for those services) where they could have been done by the accountant without cost to the estate;
  • the accountant chose to leave the lawyer to perform duties that he could have done, and so should accept responsibility for the criticisms made of the lawyer; and
  • the executors failed to keep estate monies properly invested, and incurred unnecessary expenses in various aspects of the administration of the estate.
The Court said that the lawyer involved in Re McClung should have declined to act as executor.   It ordered that the lawyer refund the estate some of the fees that had been charged, and invited the beneficiaries to take further steps to recover fees and costs that were inappropriately charged or excessive.

The Court commented on the difficulties faced by a lawyer receiving instructions for the preparation of a Will, saying that they can be put “on the horns of a dilemma” if asked to act as executor.   The Court said that this is not a position that a lawyer should normally seek.   If asked to do so, and if the circumstances of the estate are such that the involvement of a professional executor would benefit the estate, a lawyer should ensure that any entitlement to charge set out in the Will is expressly in lieu of an entitlement to claim commission.   Further, the Willmaker must be fully informed of, and understand, the risks and costs associated with their decision.

Key Points:   This case highlights the importance of:
  • informing a Willmaker about the risks and costs associated with appointing a professional person as one of their executors and allowing them to charge fees to the estate; 
  • ensuring that a professional executor who is charging the estate fees for their services considers, and if possible, practicable and timely, delegates duties to a person who can carry out that work at lower or no cost to the estate; 
  • ensuring that a lawyer who has been nominated as an executor considers carefully whether it is appropriate for them to accept the appointment, both at the time that the Will is prepared, and after the Willmakers death; and
  • ensuring that beneficiaries are kept adequately informed about the costs and expenses incurred by an executor in administering the estate.
How Can We Help?   Worrall Moss Martin Lawyers has specialist skills and experience in estate planning, estate administration and estate litigation, and can help you with any enquiries.

Please contact our estate planning lawyers, Kimberley Martin, Casey Goodman or Ashleigh Furminger, if you would like advice about who to appoint as your Executor, including whether it may be suitable to consider appointing a lawyer as your executor.

If you are concerned about whether the executor of a loved ones estate is behaving appropriately, please contact our estate administration and dispute lawyers, Kate MossRobert Meredith, Megan Bird or Eve Hickey
It's pretty simple, isnt it? 
Claiming superannuation death benefits,
and avoiding situations of conflict, when a person dies.
A superannuation death benefit is the payment of a persons superannuation entitlement (which may or may not include life insurance proceeds) on their death.   We have previously discussed (in Issue 22 of Worrall Moss Martin News) the importance of understanding the difference between:
  • Willable assets (assets that form part of a persons estate, and are able to be gifted by their Will); and
  • non-Willable assets (assets that do not form part of a persons estate, and are not able to be gifted by their Will).
Superannuation death benefits are just one example of an asset that is commonly non-Willable, unless a person takes certain steps to ensure that they fall into their estate (for example by completing a binding death benefit nomination).

Without proper estate planning, and consideration, superannuation death benefits can be paid by the trustee of the superannuation fund to:
  • the deceased persons estate; or
  • a superannuation dependant, who include a spouse of the deceased person, any child of the deceased person, and any person with whom the deceased person had an interdependency relationship at the time of their death. 
In the absence of binding nominations that remain valid at the time of death, the trustee has a full discretion over the payment of superannuation death benefits.   This means the payment may be made in a way that does not reflect the deceased person’s intentions or wishes, and often gives rise to disputes.

In Burgess v Burgess [2018] WASC 2018, the Supreme Court of Western Australia was required to make a decision about the proper payment of superannuation death benefits where a surviving dependent spouse claimed her husband’s superannuation death benefits for herself, where she was also appointed as the Administrator of his estate.  

The Facts:   Mr Burgess died in May 2015 without leaving a Will.   He was survived by his wife and two minor children.    Under the intestacy laws in Western Australia (which are different to those in Tasmania), Mr Burgess’ estate was to be divided between his spouse and his children.  

Among his assets were superannuation death benefits with four large superannuation funds.   There were no binding death nominations in place in relation to any of the funds.

Mrs Burgess made an application for Letters of Administration, and was appointed as the Administrator of Mr Burgess’ estate by the Supreme Court of Western Australia on 27 June 2016.

Prior to being appointed as Administrator, Mrs Burgess made an application to each of the superannuation funds to receive Mr Burgess’ superannuation death benefits in her personal capacity.

If the all of the superannuation funds paid the superannuation death benefits to her, Mrs Burgess would have obtained a greater benefit than the intestacy laws provided for.     

After making the applications:
  • one fund paid Mr Burgess’ superannuation death benefits to Mrs Burgess personally on 23 February 2016 (prior to her being appointed as Administrator);
  • the second paid Mr Burgess’ superannuation death benefits to Mrs Burgess personally on 30 December 2016 (approximately six months after she was appointed as Administrator);
  • the third fund paid Mr Burgess’ superannuation death benefits to his estate on 26 October 2016; and
  • the fourth fund had not yet, at the time the Court issued its ruling, made a decision about the payment of Mr Burgess’ superannuation death benefits.
The Law:   It is well-established that a Legal Personal Representative (that is, an Administrator or Executor) is bound by fiduciary duties of trust, loyalty and fidelity.   As a consequence, the Legal Personal Representative (subject to limited exceptions):
  • must administer the estate for the benefit of the beneficiaries.   One component of this is a duty to maximise the estate available for distribution between the beneficiaries;
  • must not obtain a benefit from their role as Legal Personal Representative; and
  • must not place themselves in a position of conflict (that is, where the Legal Personal Representative’s personal interests conflict with the interests of the estate).
The Decision:   The Court held that once Mrs Burgess was appointed as Administrator, any claim made by her to receive Mr Burgess’ superannuation death benefits in her personal capacity gave rise to a conflict of interest with her duties as Administrator, and Mrs Burgess was required to account for those monies to the estate.  

This is because compliance with Mrs Burgess’ fiduciary duties as Administrator required her to not only disclose the estate as a potential claimant of Mr Burgess’ superannuation death benefits, but to make an application as Administrator to receive Mr Burgess’ superannuation death benefits on behalf of the estate (to then be distributed in accordance with the laws of intestacy), which could then be considered as part of each fund
s trustee exercising its discretion.   By making an application for payment of the superannuation death benefits to her personally, she was favouring her own personal interests over the interests of the estate.  

In practical terms:
  • Mrs Burgess could retain the benefits received from the first superannuation fund.   This was because she was not an Administrator at the time of making the application for the superannuation death benefits, and therefore no conflict arose;
  • Mrs Burgess had to account to the estate for the superannuation death benefits applied for, and received, by her in her personal capacity after she was appointed as Administrator of Mr Burgess’ estate; and    
  • Mrs Burgess’ duties as Administrator required that she claim the remaining superannuation death benefits, which had not yet been paid, on behalf of the estate. 
The Court observed that these were unfortunate circumstances that could have been avoided had Mr Burgess, prior to his death, done two things differently:
  • first, if Mr Burgess had executed a valid Will, “then the undesirable scenario for his surviving family of dealing with an intestacy situation would have been avoided”.   That Will could have explicitly authorised Mrs Burgess, if she was appointed as an Executor, to act exclusively in her own interests by applying to personally receive Mr Burgess’ superannuation death benefits; and
  • second, if Mr Burgess had completed a valid binding death benefit nomination nominating Mrs Burgess to receive the full benefit of his superannuation death benefits and provided this to the trustee of each superannuation fund, then the trustee would be bound by that instruction, and no conflict would arise with Mrs Burgess’ duty as Administrator upon receiving the superannuation death benefits in her personal capacity.
Key Points:   This case highlights the importance of:
  • preparing a comprehensive estate plan, including:
    • a Will that details any preferences about the payment of superannuation death benefits (including any insurances held through superannuation funds);
    • a binding death benefit nomination providing directions about the payment of superannuation death benefits; and
    • ensuring that your estate plan, including your Will and any binding death benefit nominations (with some funds, these may lapse after a particular period of time), remain up to date;
  • properly considering, and choosing the “right” people to appoint as Executors; and
  • seeking advice following death at the earliest opportunity (including about whether you should accept your appointment as Executor, or apply to be appointed as Administrator if there is no Will).
How Can We Help?   Worrall Moss Martin Lawyers has specialist skills and experience in estate planning, estate administration and estate litigation, and can help you with any enquiries.

Please contact our estate planning lawyers, Kimberley Martin, Casey Goodman or Ashleigh Furminger, if you would like advice about preparing a comprehensive estate plan that makes appropriate provision for superannuation death benefits.

If you are considering claiming superannuation death benefits and/or have been appointed as an executor, or are a potential administrator, of an estate and would like advice, please contact our estate administration and dispute lawyers, Kate Moss, Robert Meredith, Megan Bird or Eve Hickey.  

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This newsletter contains material for general educational purposes and is not designed to be advice to any particular person about their own affairs as it does not take into account the circumstances of the reader as an individual.  It is recommended that appropriate professional advice be obtained by each reader so that reliance can be taken upon that advice.

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