Executor Charging Clauses – Common Pitfalls
This article was cowritten with Holly Challenger (Parklane Plowden Chambers).
Being an executor or trustee is a thankless task. Full responsibility for the administration of the estate or fund lies with the trustee, and they are liable to the beneficiaries throughout for their actions – including the payment back of any sums found not to be properly incurred on the taking of an account.
The role of executor is ultimately one of trust. It is no surprise therefore that most testators choose to provide in their Wills for close family members, often beneficiaries themselves, to act as executors.
That said, often testators will provide for a professional executor in place of family members. The cost to the estate is usually similar to a lay executor simply instructing solicitors to administer the estate; it can help to avoid family arguments over the administration of the estate; and gives the testator increased comfort that matters shall be dealt with properly.
Solicitors appointed as professional executors will invariably instruct their own practices to administer the estate, and so this remains a reliable source of income for many firms. However, what about the time spent by the executor themselves in instructing and liaising with those actually doing the administration? Decisions still rest with the professional executor themselves and can take some considerable time.
In the absence of any benefit to the named executor, why would such a professional executor agree to take probate? Usually, their acceptance of the role is due to a specific charging clause in the Will, permitting the executor themselves to charge for their own time (as well as being indemnified for the costs incurred by the solicitors actually dealing with the estate).
However, this system can be open to abuse, and this article considers the limitations on this indemnity from the estate and how it can go wrong.
Can I charge?
Sections 28 and 29 of the Trustee Act 2000 provide that, in order to charge for one’s time, the executor must be (1) a professional and have either (2) the benefit of a charging clause in the Will or (3) the approval of their co-Executors. Those sections refer to trustees, but section 35 confirms that the provisions of the Trustee Act 2000 also apply to personal representatives.
It is also important to note that the power of a trustee to agree that another trustee may be remunerated for his or her services is a power to be exercised for the benefit of the beneficiaries.
Without a charging clause or co-executor approval, there is therefore no immediate entitlement to raise invoices for personal time spent. A trustee or personal representative can apply to Court to seek authorisation for work done or to be done (see below), or can attempt to agree remuneration on a contractual basis with the beneficiaries prior to accepting the position. However, professionals considering accepting the potentially onerous role of executor will often require certainty that they are entitled to charge for their time.
So what can be charged?
An executor’s charging clause impliedly only authorises proper and reasonable remuneration, and beneficiaries are entitled to insist on the charges being investigated. The onus is on the Executor to justify the charges rendered.
On either assessment brought by the beneficiaries (under the Solicitors Act 1974) or otherwise upon the taking of an account, the Court will consider the reasonableness and proportionality of the work done, the time spent, the hourly rate billed, and the seniority of the fee earner.
On a practical level, this means that un-particularised invoices “for services rendered” or similar are unlikely to be accepted by the Court as appropriately discharging the burden of proof. The invoice should explain who did what work, and when; in the same way that a professional might charge a client in the course of its business, a trustee should be ready to particularise his time.
It is the writers’ view that despite this, the Court may be willing to entertain considering matters on a quantum meruit basis. If historically, invoices limited in detail have been provided by a professional executor (creating a potential liability on the taking of an account), then if sufficient evidence can be put before the Court as to what did happen, who did the work, and why the hourly rate claimed is reasonable, then the Court may be prepared to authorise some level of remuneration in any event.
Whilst it is therefore possible to secure retrospective authorisation for remuneration, the outcome of such an application would be highly fact specific.
Are you a suitable professional for the purposes of s28?
So what counts as a professional? The case of Da Silva v Heselton provides that executors and trustees need to show that their work fell within the scope of their profession.
In this specific case, the wording of the Will contained the following provision:
‘… any of my Trustees who shall be engaged in any profession or business [to] charge and be paid… all usual professional and other fees… for work or business…done or time spent by him… in connection with the administration of my estate… including work or business outside during the course of his profession and work or business which he could or should have done personally had he not been in any profession or business’.
In this case, Gladys Dulcie Townsend (“the Deceased”) had executed a Will on 28 June 2001. The Will appointed the First Defendant and a Solicitor as the executors. The Claimant was the residuary beneficiary and sought to remove the executors in 2015 for various reasons. The claim was successful and an order removing the First Defendant by consent was made on 2 June 2016.
However, following her removal, the First Defendant sought to charge the estate for the period of time spent as executor. The First Defendant stated that her monthly rate was £300 (a reasonably low sum, but one which eventually totalled £43,350). The First Defendant was employed by her husband’s firm of solicitors but was not herself a solicitor, Chartered Legal Executive, or otherwise a member of a regulated body.
On 28 August 2019, Deputy Master Lloyd found that the First Defendant’s activities in administering the estate were not done in the course of her business. The First Defendant was not administering the estate as a professional; the distinction was that she was administering the estate, and going to work at a solicitors firm. The Court concluded that the First Defendant was not entitled to charge the estate for her time.
The First Defendant sought to appeal the decision of Deputy Master Lloyd and this matter was heard at the Court of Appeal. Nugee, Arnold and Lewis LJJ gave the following view:
“I conclude that a trustee or executor can rely upon the charging clause in the Will to charge for work done or time spent in the administration of the estate only if that work falls within the scope of their profession or business in questions; that is to say if it is work of a type which would attract or incur their usual professional fess.”
This case has highlighted that other professionals (not involved in the estate administration profession), such as accountants, barristers, surveyors and solicitors need to take very careful advice when intending to charge for their time, as they will need to be able to prove that the work they have completed in relation to the administration of the estate is inexplicably connected to their professional work.
The executor’s personal liability to account to the beneficiaries for sums improperly incurred remains a significant risk when acting as a professional executor. If a professional does decide to act, and elects to charge the estate for their own time (as well as being indemnified for the actual administration of the estate for which they have engaged a firm), it is recommended that they take detailed advice on this point, or otherwise obtain the (informed) consent of the beneficiaries in writing.
The alternative is the risk that invoices rendered will not pass the ‘test’ as set out above, the result of which would likely be an order that some or all of that remuneration is repaid on the taking of an account - or worse still, the executor is found to have no entitlement to charge in the first place.
These are points all too easily overlooked, and to which great attention should be paid, as the potential liability to professional executors in their personal capacity is significant.