William is one of the four children of Joseph (who died in 2004) and Nola (who died in 2018). Joseph and Nola had wills leaving a life interest in their estates to the other. After Joseph’s death, Nola continued to receive the income from Joseph’s estate. This meant that it was not until Nola’s death in 2018 that the final administration of Joseph’s estate could begin.
The executor and trustee of both Joseph and Nola’s estates was a professional trustee company. In 2019, William complained to the trustee company about the level of fees charged for administering Joseph’s estate ($101,189). William said that there was nothing about his father’s estate that meant it was particularly complex, and he could not understand why the fees were so high.
The trustee company reviewed the fees charged, and considered they were reasonable. William complained to FSCL.
The starting point when considering a complaint about estate administration fees is that a trustee company is entitled to be paid for their professional services. In Joseph’s will he expressly directed that the trustee company would be paid for their services from his estate. The entitlement to be paid also arises from legislation, which says that a trustee company can charge fees:
a) amounting to 5% of the total value of the estate assets and estate income (the 5% fee), and
b) for the trustee company’s time in dealing with taxation matters (tax fees), and
c) for any other matter of an unusual or special nature (special fees).
We calculated how much the trustee company could charge as the 5% fee. At the start of the estate administration, the estate assets amounted to $1,116,075 and, in the 14 years between Joseph and Nola’s deaths, the income generated was $502,976. This meant that the most the trustee company could charge as the 5% fee was $80,952, but $91,184 had been charged (a difference of $10,232).
The tax fees charged over the years amounted to $5,587, which we considered reasonable.
We next looked at the amount charged as ‘special fees’ – $4,418. We asked the trustee company the basis on which they charged those special fees. The company said they had no information on their files explaining why these fees were of a special or unusual nature. We said that without evidence to support the charging of special fees, the $4,418 amount should be refunded to the estate.
We suggested, and the trustee company agreed, that it should refund a total of $14,650 in fees to the estate (the $10,232 charged above the 5% cap, along with the $4,418 in special fees). This amounted to $3,662.50 each to William and his three siblings.
Both parties accepted our suggested resolution, and the complaint was resolved.
Insights for consumers and participants
The level of trustee company estate administration fees is a common complaint we investigate. Estate beneficiaries are often surprised at the level of fees charged by trustee companies, especially when they compare the costs a lawyer may charge for performing a similar role.
We encourage trustee companies to be clear and transparent about the fees they will charge. This is important when they are taking instructions from will-makers and is equally as important at the commencement of estate administrations. Trustee companies also need to ensure that they only record fees as ‘special’ when the work is outside the scope of the usual work undertaken in estate administration.