Who and how to appoint an Executor in your Will in South Australia

Choosing who will take on the role of Executor of your Will can sometimes be challenging.

Most Will-makers (aka ‘Testators’) appoint a trusted friend or family member as their executor. This person will end up playing a very important role, with a lot of responsibility.

If they instruct an experienced lawyer who specialises in Wills and Estates, then most of the ‘heavy-lifting’ will be done for them by the lawyer. This might include closing the deceased’s bank accounts, selling real estate and other property, dealing with impatient or disappointed beneficiaries and perhaps even dealing with a Court claim made by someone who is contesting the estate.

Can Executors also be Beneficiaries?

Yes – most executors of Wills are also beneficiaries of the estates that they administer. You can be both executor and beneficiary of a Will.

However, a conflict can sometimes arise, because the duty of the executor is to be fair and impartial to ALL beneficiaries, claimants and creditors of the estate, without fear or favour. If the executor themselves should wish to make a claim against the estate, then they will need TWO sets of lawyers to act for them: one in their capacity as Executor (ie on behalf of the estate overall) and the other to act for them in their personal capacity (ie as claimant or creditor). This is because the same lawyer cannot act both for the estate and against the estate at the same time.

The role of an Executor – and should they be paid?

Your executor has significant responsibilities, including locating your Will, instructing a lawyer, obtaining probate (if required), managing your estate’s assets, paying debts and distributing inheritances to your beneficiaries. This can be a time-consuming and complex task, especially if your estate includes complicated assets or if disputes arise among your beneficiaries.

Given the effort involved, it’s understandable that you might consider whether your executors (particularly executors that do not otherwise benefit under your Will) should be compensated for their work.

When a Testator makes their Will, it typical for them to think that:

The executor’s job won’t be too difficult, and doesn’t require payment for their time; or
The executor is a beneficiary along with other beneficiaries, and therefore there is no need for payment.

However, in some instances, the Testator will direct that the executor be paid for their services. This is often the case where an independent professional person (e.g. a lawyer or accountant) is appointed as the executor.

What happens then, if you find yourself in a situation where you are the executor of an estate but there is no provision in the Will to pay you for your time and effort in taking on all these duties?

The answer comes in 3 alternatives:

You can make an Application to the Supreme Court of South Australia under S 96 of the Succession Act 2023 (SA) to request that the Court makes an Order that you be paid an ‘executor’s commission’;
If ALL estate beneficiaries unanimously agree in writing, then you can charge an ‘executor’s commission’. This must still be reasonable in all the circumstances of the estate, and should not exceed standard rates of executor’s commission;
Without either 1) or 2) above, you are out of luck, and CANNOT receive any payment for the work you perform as Executor. HOWEVER, you MAY still be able to claim reimbursement of legitimate out-of-pocket expenses that you have paid-for personally in the administration of the estate. Be warned however, that this will NOT include any allowance for your time, trouble or efforts. In other words, you cannot receive an hourly rate for the tasks you perform. Reimbursements will need to be ‘reasonable’ and at normal market rates. There must not be a ‘profit’ or uplift component.

Gift or Payment for Executors

The Testator may specifically state in their Will that the Executor is to be paid for the work of administering the estate. A legacy or gift to an executor in a Will is usually construed as being dependent on the performance of the executor’s duties. If an executor dies without carrying out those duties, the legacy may fail.

Even if the Will does not provide for the payment of the executor, the executor may apply to the Court for a commission for the work performed [Succession Act 2023 (SA) s 96]. Generally a lawyer who acts as an executor will not be entitled to a commission in addition to the normal legal fees for such work.

Non-professional executors may seek advice and help from professional services to administer a deceased estate, such as financial advisors, accountants, and lawyers. Any fees incurred will come out of the estate.

Your Will can specifically state that your executor is to be paid for their work in administering your estate. This is often the case where a professional person (e.g. a lawyer or accountant) is appointed as the executor. This will often be a pre-requisite to any professional accepting their executor appointment. NB in South Australia solicitors are required to disclose their fees to act as executor before you sign your Will, AND that there is an express ‘charging clause’ in the Will to permit the lawyer to charge as an executor, so make sure you receive that information before you sign your Will.

However, even if the Will does not specifically refer to payment, executors may be entitled to seek remuneration for their services. This is typically referred to as an executor’s commission. The amount of commission is not fixed and may vary depending on the complexity of the estate and the time spent managing it.

Generally, a professional person who acts as an executor will not be entitled to an executor’s commission in addition to the normal fees they charge for such work ie it is one or the other, not both. So a lawyer cannot act as executor and receive an executor’s commission AND instruct his own law firm to act as solicitors to get paid professional fees for the same work.

Another approach is to give your executors a gift through your Will, such as a specified sum of money or a physical asset.

A gift may be a suitable option if your executor is a trusted family member or friend who might feel uncomfortable claiming formal remuneration.

A gift to an executor in a Will can be construed as being dependent on the performance of the executor’s duties. If your executor dies or otherwise fails to carry out those duties, the gift could potentially fail unless the Will specifically states that the gift is unconditional. An experienced lawyer specialising in drafting Wills can help you to make your Will so that your intentions regarding the nature of the gift are clear, ensuring that the chance of a dispute is minimised.

What is executor’s commission

Executor’s commission is a payment to an executor (or executors) of a deceased estate for their time and effort in administering the estate. That means, doing all the things to ‘tidy up’ what was left behind, pay any outstanding liabilities, and distribute any remaining assets to the beneficiaries of the estate.

In South Australia, the legislation allows an executor to make a claim for executor’s commission, but it is silent on just how much should be paid. In 1920, the South Australian Supreme Court came up with a ‘scale’ which is now referred to as the ‘Barr Smith scale’ (named after the Court case that decided this issue – NB that decision referred to old currency of pounds, shillings and pence, and this has since been converted into modern currency). The Court decided that the following approach was reasonable:

On specific assets that are brought into the estate, including cash, money in bank accounts, and life insurance policy benefits, the executor is entitled to commission of:

5% on the first $2,000;
1% on the amount from $2,000 to $200,000; and
75% on the amount over $200,000.

On other assets realised such as real estate, the executor’s commission should be:

5% on the first $2,000; and
5% on amounts over $2,000.

On assets, such as real estate, that are transferred to the beneficiaries without being sold first, the executor’s commission should be:

25% on the first $20,000; and
75% on amounts over $20,000.

The Supreme Court of South Australia has since published an ‘Indicator’ on the commission generally payable to executors where:

The value of the estate is less than $1 million; and
There are ‘no special or unusual circumstances’ which warrant a higher commission.

The Indicator makes it clear that the allowance is always subject to the Court’s discretion to allow a higher or lower amount depending upon the circumstances of the case. Ultimately the Court will decide what is ‘just and reasonable’ in the circumstances of each individual estate. The nature and extent of the executor’s activities, the amount of work undertaken and how complicated that work was will all impact on the amount to be allowed.

Relevant Australian cases

Re The Estate of D A Lindsay NSWSC 578 (New South Wales)

In this case, the executor made an application for commission to be paid to him where the value of the estate was made up of $1,115,923 in capital assets and $5,268 in income collected. The executor was also a solicitor and his fees for his professional duties were paid.

As for commission relating to his executorial duties (not professional fees as a solicitor), the Court noted that he had “organised the cleaning of the house and its preparation for sale, negotiated with the agent for sale of the house, arranged for a headstone to be erected, and also carried out various negotiations with beneficiaries concerning payment of executor’s commission”. The executor had tried to negotiate with the beneficiaries on the commission he would receive, asking for 2.5% (including GST) of the value of the estate (being, $28,535.29).

The Court came to the conclusion that, “given the size of the estate, the appropriate benchmark for commission is around one percent of the distributable estate, which would result in a figure of $11,159”, and rounded that amount up to $11,250.

Re Estate of Celestino Ghidella QSC 106 (Queensland)

Here, the value of the deceased estate was $2,399,225.30. The executors report having “attended to the funeral arrangements, organising bank accounts for the estate, instructing solicitors and accountants and organising for the maintenance of the assets of the estate by various tradespersons.”

The Court referred to Re Barr Smith (1920) SALR 380, noting that the South Australian Supreme Court favours the view that commission should be based on a percentage of the asset values and the income managed after the date of death. However, the Court also noted that “the assessment must have regard to the value of the efforts of the executors”.

The executors wanted commission of 5% on income and 3% on capital, resulting in an allowance of $87,417.54. The Court decided that their claim “greatly exceeded” what is considered to be appropriate in the circumstances, and allowed 1.5% on income and 2% on capital, resulting in commission of $52,616.50.

Kirkpatrick v Kavulak QSC 282 (Queensland)

In this case, the deceased estate was valued at approximately $1 million in capital, and $232,000 of income.

The Court held that a “relatively modest remuneration is appropriate”, taking into account the fact that the administration of the estate was not complicated, and she had already reimbursed herself for costs paid relating to litigation about the estate in which she had been involved.

The Court paid the executor an allowance of $20,000, being “slightly less than two per cent on capital of $1 million and one percent of income”.

Atkins v Godfrey & Ors WASC 83 (Western Australia)

The deceased estate in question here was valued at $3,125,271 in total, with debts of $20,019. Overall, the executor spent about 210 hours on the administration of the estate.

The Court said that it was “just and reasonable” that the executor receive executor’s commission, “unless his conduct in or in connection with the administration of the estate disentitles him to such remuneration”. On this subject, the Court noted that a court may “refuse commission … where there has been some misconduct in the execution of the executor’s duties”.

The Court mentioned the following factors as being relevant to the consideration of the amount of executor’s commission that should reasonably be paid:

It should not be assumed that an executor will be awarded the rate of commission allowable by the legislation, as this is a maximum rate of commission which should only be allowed where the estate administration has been very difficult, or the financial benefit to the estate by the executor’s acts are very considerable;
The nature and the extent of the executor’s activities should determine the commission payable, rather than the size of the estate;
The executor choosing to engage and pay for (from the estate) the services of agents, solicitors and accountants should be taken into consideration when assessing his commission;
The amount of work undertaken by the executor is to be considered, but it is not appropriate that the amount of commission be determined on an hourly rate; and
The court must form an assessment of what is “just and reasonable rather than apply the Barr Smith scale”. However, the Barr Smith scale is useful to determine what is just and reasonable.

In the end, the Court decided that the rate of 0.6% of the gross value of the estate (being $19,759 of $3,293,230.35) was just and reasonable commission for the executor’s services, because of the fact that the executor had acted in a way that, in part, disentitled him to a larger rate of commission.

Summary

When deciding whether to pay an executor or give a gift, you can consider:

Professionals: If you appoint a professional executor, such as a solicitor or accountant, they will usually charge a fee for their services. This fee might be a hourly rate for the work that they perform, or it might be a percentage-based commission, but not both.
Complexity: Most simple estates will not require extensive work, while a large or complicated estate might demand significant time and effort.
Relationship: Close family members or friends may feel uncomfortable accepting payment but might appreciate a gift.
Clarity: Clearly specifying your intentions in a well-drafted and up-to-date Will can help avoid misunderstandings or disputes among beneficiaries.

If you would like further advice about administering an estate, or if you are concerned an Executor is not administering an estate properly, contact our friendly team.

When it comes to Wills, Probate, Deceased Estates, asset protection & estate planning in Australia, you can trust the oldest law firm in South Australia, Genders & Partners to guide you through the tough decisions you must make for your family’s future care and welfare.

If you have any questions, or would like further information, please email us. Would you like a quick phone call to discuss? Feel free email us or use this link and book a timeslot for a free 15-minute phone consultation on my schedule

We can help you to protect yourself and your family. We look forward to being of service.

Want to find out more?

More Estate Administration Resources

All these and many more Probate and estate topics are available for discussion with the oldest law firm in South Australia.

Disclaimer

The information contained in this document is intended as general information only and has been prepared without taking into account the needs, objectives or financial information of any particular person.

Prior to making any decision, you should assess whether the information is appropriate to your particular needs, objectives and financial circumstances.

While Genders and Partners has taken reasonable care in the preparation of this information, subsequent changes in circumstances (including legislative change) may occur at any time and may impact on the accuracy of this information.