When making your Will, one of the most important decisions is who to appoint as your executors. They are the people who will administer your estate: identifying your assets, paying any liabilities, settling any tax due and finally giving the remaining assets to your chosen beneficiaries under the terms of your Will. Being appointed an executor and/or trustee is an onerous role. Not only is it often necessary to take complex decisions, but it can take a lot of time.
If your Will creates a trust, you will also need to decide who to appoint as your trustees. For example, you may wish to make a flexible Will in which your net estate, once administered, is held upon a wide discretionary trust from which your chosen beneficiaries can benefit. It is then the job of the trustees to decide which of the beneficiaries should receive assets from the trust, how much they each receive, and when, taking into account guidance given by you in your lifetime.
The same people are often appointed as both executors and trustees. You may appoint relatives, friends or professionals or a combination of all three.
As well as deciding who to appoint, you should consider whether you would expect any of your executors and trustees to be paid for the time they spend dealing with your estate. As a starting point, all executors and trustees are entitled to be reimbursed for their out-of-pocket expenses. But what if any of your executors/trustees also want to be paid - or you want them to be paid - for the time they spend dealing with your estate?
When the Will is silent – the default position
In many cases, this will be an easy decision – in most cases you would expect a professional to charge reasonable fees for their time spent in these roles, whereas you may not expect family and friends to do so. The law reflects this: as a default position, individual executors and trustees are not entitled to payment unless (broadly speaking) they are acting in the course of a profession or business which includes the management or administration of trusts and estates. Even then, they must obtain the written agreement of their co-executors or co-trustees. This is based on the fundamental legal principle that a trustee cannot make a profit from their trust, nor put themselves in a position where their own personal interests and their trustee duties may conflict.
The effects of this can sometimes seem unfair, and may not be obvious. Suppose you appoint your brother, a plumber, as your executor. When you die, your house forms part of your estate. A pipe bursts. Your brother does the necessary repair work. Should he be paid for his time doing that work? Under the default position, he would not be able to charge, other than for reimbursement for the new pipe.
Or perhaps you have appointed a family friend, who is a lawyer, as an executor. Can they be paid for their time spent acting as an executor and does it matter whether they specialise in estate administration or some other area of the law? What if you appoint your accountant or land agent?
As indicated above, only executors who act in the course of a profession or business which includes providing services in connection with the management or administration of trusts can charge (with the consent of their co-executors). This may not necessarily cover lawyers or accountants whose day to day expertise is in a different area of law, or other professionals such land agents – even though they are often appointed as executors on the basis of their individual trust experience.
An executor who cannot charge may well be unwilling to act without remuneration, so your estate may lose the benefit of that experience. So it is important to think about this when making your Will, so that specific wording can be included to achieve your desired outcome. Including an express charging clause can authorise certain executors to charge for their time when they would not otherwise be able to, provides clarity and avoids disputes.
When the Will contains a charging clause – how it will apply
The law relating to the payment of executors and trustees is complex, and, in late 2021, was examined in a High Court case relating to the estate of Gladys Townsend. In that case one of the executors sought to charge the estate £43,350 for her work in that capacity.
Mrs Townsend's Will included a commonly used charging clause overriding the default position, and giving her executors/trustees power to charge as follows:
"… [power] for 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 [or] his firm in connection with the administration of my estate or the trusts powers or provisions of this Will or any codicil hereto including work or business outside the ordinary 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".
The executor argued that she should be paid because she had been engaged in a number of businesses during the period of her executorship, albeit that the businesses had no relevance to the matter of administering deceased's estates.
However, the judge found that the words used in the Will required there to be a link between (1) the scope of the profession or business of the executor and (2) the work that the executor carried out in relation to the estate for which she was seeking to charge. In other words, if that work would not arise in the usual scope of that profession or business, the executor could not charge for it. He therefore concluded that the executor was not able to claim payment of her fees from the late Mrs Townsend's estate.
Let's return to our plumber example. A plumber is engaged in a business, so on the basis of this case he may charge for his work in relation to the estate – but only to the extent that the work he does is linked to the normal scope of the plumbing industry. This clause means he can now charge for his time mending the burst pipe. However, despite the reference in the Will's charging clause to 'work or business outside the ordinary course of his profession', he still cannot charge for the rest of his time dealing with the estate where that time is unrelated to plumbing.
While you could be forgiven for reaching a different conclusion on first reading of the clause, in many ways this is a sensible outcome. However, knowing that the role of executors/ trustees can take a lot of time and effort you may want the people you appoint to be able to charge for their time even if the work they do has no link to their profession or business. If so, it is vital to include wording in your Will that makes your intention very clear.
The view of the judge in the recent Townsend case was that if a person's job does not involve dealing with trusts or estates then they cannot charge for their time unless there is a specific clause in the Will saying that they can do so. If, however, the Will includes a charging clause similar to that in Mrs Townsend's Will, and an executor is involved in a business where it would not be out of the ordinary to (a) act as an executor and trustee, and (b) to charge for time spent in that role on matters not directly related to their business or professional skills then, although this particular case didn’t address this, we are of the view that they can charge for their time. This will be relevant to accountants and other similar professionals acting as executors and trustees.
In light of this recent case, it is important to revisit the question of how you expect your executors and trustees to be paid. If in doubt, seek advice as to whether your Will includes the right wording to achieve that result.
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