Gina made a will in 2007 and appointed a trustee company to be the executor of her estate.
The trustee company advised Gina (who at the time was in her 80’s) how fees would be applied for the administration of her estate after she died. Gina understood and was under the impression that the trustee company would charge for the time they spent in administering her estate, on a time and attendance basis.
Gina died in September 2020, leaving her estate to her two children.
The trustee company administered Gina’s estate, which was a fairly straightforward administration. When meeting with Gina’s children at the start of the estate administration, the trustee company gave the children their fees documentation. This stated that a sliding scale of fees would apply, at a rate of 5% of the first $250,000 of the estate’s value, a further 2% on the next $250,000, and 1% thereafter. The trustee company estimated that their fee for administering Gina’s estate would be just over $16,000.
David, one of Gina’s children, later discovered a letter Gina had written to him in 2007. In the letter Gina had noted her reasons for using a trustee company to administer her estate. Gina also noted her understanding that the company would charge ‘a fee for the work they do when they wind up the estate’.
As this information was different to the fee information the trustee company had given David and his sister, and because of a reference in the new documentation to ‘existing clients may be on alternative historic scales and rates’, David became concerned.
David complained to FSCL about how the estate administration fees were being calculated.
Dispute
David felt that the sliding scale of fees was not in line with his mother’s understanding, nor represented what she had agreed on fees with the trustee company.
Review
FSCL referred David’s complaint to the trustee company’s internal complaints process. The trustee company acknowledged that some clients may be on an alternative historic scale and rate of fees, and that they may have applied the wrong scale when giving David a fee estimate. When the trustee company looked closer at Gina’s file, they discovered that they had agreed with Gina that they would use a different and older scale of fees when charging for her estate administration.
When the time and attendance scale was applied to Gina’s estate administration, the fee that the trustee company was entitled to charge reduced to about $7,200. The trustee company offered to honour the original contract which meant that, instead of a charge of $16,000, only $7,200 (time and cost) was charged.
David accepted the reduced fee in settlement of his complaint.
Insights for consumers
Historic scales and rates for charging should be monitored by both beneficiaries and estate administration companies. While it is expected that original contracts and agreements are honoured or observed, this may not always be the case.
In particular, it is important to check with the trustee company that the fee scale they are applying is correct, to question the fee if you think it is too high for the time involved in administering the estate, and whether there have been any changes to fees since the deceased made their will.
