Who is entitled to the executor fees when a lawyer in a law firm is an executor?
Imagine this scenario: Larry the Lawyer works for a large law firm. For ease of reference let’s call the law firm LLF. The clients love Larry. One such client – let’s call him Clint the Client – was so impressed with him that he appointed Larry the Lawyer as his sole executor. Clint the Client is worth about $200,000,000. Using the tariff1 as a guide, the executor fees might be as much as $10 million. So does Larry the Lawyer or his firm LLF become entitled to the executor fees?
Larry the lawyer might argue as follows:
1. Larry the Lawyer was appointed – not LLF. After reviewing the law it is not clear to us whether Ontario law permits law firms to be executors.
Some argue that a law firm may be appointed as executor. That may be relevant to our discussion because if a law firm cannot be appointed as an executor, by what right do they claim any entitlement to legal fees?
We refer the reader to the seminal text Macdonell, Sheard and Hull on Probate Practice, Fifth Edition, page 238. In FN 33 of that textbook there are a number of cases and articles worth reviewing on this topic. We invite the reader to review Rodney Hull’s article “Appointing a firm as executor” published in the Canadian Bar Journal (N.S.) VOL. 1, NO. 2 PP. 29-30. Here are some of the key points made by the late Rodney Hull when he wrote the article in April 1970:
- It is permissible to appoint a law firm, but there is a disinclination in Canada to do so because of both real and technical difficulties;
- Appointing a law firm will be interpreted as the appointment of the members comprising the firm unless there is a contrary intention expressed in the will;
- The reason it’s not done often in Canada may be because by the time the will maker dies the individual partners can change. It would be most unlikely that those new partners were the one the testator wanted in charge of his/her estate;
- In the United Kingdom law firms are appointed as executors with regularity;
- See Horgan, Re  3 All E.R. 1570 at page 1572. The late Rodney Hall discussed this case where a clause was chosen and acceptable because it removed the uncertainty discussed above.
I spoke to Professor David Freedman about this issue. He believes that the authorities do not support the proposition that one can appoint a law firm to be the executor of a Will. After reviewing the late Rodney Hull’s article, Professor Freedman commented,
In Re Horgan,  3 All E.R. 1570 (Probate), the appointment clause in the Will read:
“I APPOINT the firm of RODGERS HORSLEY & BURTON … who may act through any partner or partners of that firm or their successors in business at the date of my death not exceeding two in number to be the Executors and Trustees of this my Will and they or the survivor of them or other the trustee for the time being of this my Will are hereinafter called “my Trustees”.”
This was interpreted to mean any individual partner by the Judge who said:
“The central question is whether this is an effective appointment, or whether it is void for uncertainty. The law does not permit the appointment as executor of a partnership firm as such. Where a clause in a will is so phrased as to purport to do this, the court construes it as appointing the individual partners as executors: see In the Goods of Fernie (1849), 6 Notes of Cases 657. This case was decided 120 years ago, there is no other reported decision on the point and it has never been questioned.” [Emphasis added.]
More recently in Re Rogers,  EWHC 753 (Ch), the court doubted the correctness of the decision in respect of a firm that was an LLP based on the nature of the partnership under the statute allowing such a form of business organization.
In a Canadian case, Re Johansson Estate (1992), 48 E.T.R. 96 (B.C.S.C.), the appointment clause in the Will provided:
“I APPOINT two of the partners for the time being in the firm of THE LAW OFFICES OF Kierans, Van Hof, Barristers and Solicitors of #702 — 1045 Howe Street, Vancouver, British Columbia V6Z 2A9 or the firm which has then succeeded to and carries on its practice to be the Executors of this my Will and Trustee of my estate.”
Master Joyce distinguished Horgan and held the appointment to be void:
“11 In my opinion there is a very significant difference between the phraseology of the appointment in Re Horgan and that in the will under consideration here. In Re Horgan the first words of the clause appointed “the firm”. It was held that those opening words constituted the appointment. The words were construed to be an appointment of all of the partners of the firm alive at the death of the testator. The words “any partner or partners … not exceeding two in number” were therefor capable of being construed as expressing the testator’s intention that of the partners appointed (all surviving partners) only two, at most, could apply for probate with power reserved to the others. In the present case, however, the words of appointment are quite different. The testator purports to appoint not the firm or all of the surviving partners of the firm but two (unidentified) persons who are partners of the firm or successor firm at the time of his death.
12 I am unable to say the clause in this case is capable of the same construction which was given the clause in Re Horgan. I find it indistinguishable from the kind of purported appointment in In the Goods of Baylis and In the Goods of Blackwell. I find the clause is void for uncertainty. Consequently, in my opinion Mr. Kierans is not entitled to a grant of probate of the will.”
On this basis Professor Freedman does not think the authorities support the proposition that one can appoint a law firm to be the executor of a Will.
Let’s start with the proposition that Ontario does allow law firms to be appointed as executors. If that were true, Larry could point out that the will maker chose not to appoint LLF because of the uncertainty of who would be a partner in the law firm when the testator died. Perhaps the partnership would split up and then who would the executor be? Arguably, if Clint the Client specifically chose Larry the Lawyer and specifically did not choose LLF then it may be reasonable to assert that it is only Larry the Lawyer who has a right to be paid for the discharge of executor duties. Moreover, the law firm LLF has no right to charge executor fees because they are not actually the named executor.2
Further, if Ontario law does not permit law firms to be appointed as executors, then Larry the Lawyer will argue that the law firm has no status to claim any entitlement from the estate for executor fees. If they cannot legally be executors, how can LLF claim entitlement to fees for that service?
2. The role of an executor is different from the role of a lawyer. Larry will presumably acknowledge that if his work as executor is considered legal work then the executor fees should be paid to the law firm LLF. But it would likely be his position that professional fees for being an executor is not legal work. There is a big difference in the job of the executor and the job of the lawyer for the estate. He/she follows the instructions in the testamentary document and in so doing steps into the shoes of the testator. The lawyer advises the executor how to best collect and distribute the assets in accordance with the mandate set out in the Will. They are two different jobs. Arguably, just like Larry the Lawyer can successfully invest in real estate or the stock market without having to share the profit with LLF, so too Larry the Lawyer can act as an executor without sharing the executor’s fees. As such, it may be that entitlement to the executor fees hinges on whether carrying out executor duties falls within the definition of legal work.
Jordan Atin wrote an interesting article for the Canadian Bar Association entitled “Executor’s Insurance”3. LAWPRO coverage for a lawyer carrying out his/her duties as an executor turns on whether the work of an executor is considered legal work. Many practitioners, like Ian Hull, will argue that the answer is yes. Larry the Lawyer would be giving himself legal advice when determining how to divide and distribute the assets, or pay the taxes, etc. But LAWPRO may take a different position. As Jordan Atin says, in his article,
The manner in which your appointment as Estate Trustee came about is particularly relevant to the coverage issue. LawPro’s current view is that if a lawyer was appointed as Estate Trustee by a client of the lawyer’s firm, the lawyer’s services as Estate Trustee in the administration of the estate falls under the definition of “Professional Services”. In those circumstances, the appointment arose from the practice of law. If, on the other hand, the lawyer was appointed as an Estate Trustee by a family member or friend who is not a client of the firm, LawPro takes the general view that your executorship is not covered by the definition of Professional Services.
In a Practice Pro blog4 LAWPRO says the following, ”It’s important for lawyers adopting these responsibilities to understand what insurance coverage will be available to them, and whether additional protections may be advisable. While LAWPRO’S Primary Policy (the “Policy”) does cover certain responsibilities associated with estate and trust administration, there are important exceptions and limitations. …” Among the services excluded from coverage, the blog lists investment advice, intentional wrongs, fee disputes and punitive damages.
Bottom line – Larry the Lawyer will argue that just as LAWPRO will sometimes classify his work as an executor as non legal work and therefore not provide coverage, LLF cannot classify his work as an executor as legal work and therefore the law firm has no entitlement to the executor’s fees.
LLF would argue quite differently:
- Executor Work is Legal work. Acting as an executor is a professional retainer in their capacity as a member of the firm. To treat it otherwise would amount to the lawyer taking on a side job that takes away from their effort and duties to the firm and potentially exposes the firm and them personally to claims. Every action Larry takes as executor he wears his hat as Larry the Lawyer and gives Larry the Executor legal advice. They would also point out that in the majority of instances LAWPRO does provide the lawyer/executor coverage. Accordingly, it appears that LAWPRO views a lawyer carrying out work as an executor as providing professional services as a lawyer.
- The Terms of the Partnership Agreement/Employment Agreement Govern. Almost all law firms have partnership agreements that govern the relationship. They have employment contracts that govern the business terms of the firms’ dealings with associates. Undoubtedly, most of them deal with what fees earned by the lawyer belong to the firm and what work falls outside that classification. Whether the law firm is entitled to the executor’s fees may therefore depend on the terms of the contract/agreement between the lawyer and his or her law firm.
- Breach of fiduciary duty for failing to disclose interests and receipt of privately retained earnings.
Under the common law and Ontario’s Partnerships Act,5 every lawyer who is a partner in the firm has a duty to account for private profits and a duty to render accounts. LLF would characterize what transpired as a breach of fiduciary duty and argue that Larry’s earnings as an executor were benefits derived from connections to the firm. They were earnings received in competition with services provided by the firm. Such actions would be in direct contravention of sections 23-30 of Ontario’s Partnership Act. For a case that is very much on point see McKnight v. Hutchison.6 In response, Larry the Lawyer would have to rely on the partnership agreement, which, depending on the wording, might permit partners to conduct business other than law and receive remuneration separately for such business. A lot will depend on what their agreement says.
The judge hearing the case will review the relevant statute, partnership agreements and contracts between the lawyers, the testamentary documents and any relevant case law. To date, the most relevant case we found that deals with this issue is McKnight v. Hutchison7.
Anecdotally, the cases we are familiar with involving lawyers as executors result in the law firms – not the lawyers – sending out the bills as executors and collecting the fees. In the last six months, we have been consulted several times on this issue where a lawyer is personally claiming executor fees as his/her own. As more and more lawyers take on the task of being executors, the question will continue to arise. When an executor is entitled to a big pay day as a result of the work done and can rationalize why he/she should be paid personally, we believe it’s only a matter of time until these cases find their way into a courtroom.
- See How Much Compensation Is An Estate Executor Entitled To?
In a May 11 2020 article entitled How Much Compensation is an Estate Executor Entitled To? The author explains, “While the right to claim compensation for acting as a trustee is confirmed by statute, the legislation only offers guidelines for calculating the amount of compensation allowable. Section 61(1) of the Trustee Act, RSO 1990, c T.23 states that a trustee is entitled to “such fair and reasonable allowance for his care, pains and trouble, and his time expended in or about the estate, as may be allowed by a judge of the Superior Court of Justice.” Given this lack of specificity in the legislation, courts have attempted to set down more precise rules in case law. Over time, a percentage tariff system has become the default method for calculating executor compensation. Under the percentage tariff system, compensation is calculated as follows:
– 2.5% of the value of every payment into or out of the estate, and
– A care and management fee of 2/5 of 1% of the average annual value of the estate’s assets. The care and management fee may be charged after the first year of administration. ↵
- Arguably, the law firm’s rights are as between the firm and the individual lawyer. While the law firm has no status as against the estate the employment contract or partnership agreement can set out terms obligating the lawyer to pay over to the firm any executor fees to which he is entitled. ↵
- Canadian Bar Association – Executor’s Insurance (cba.org) ↵
- See Availability of insurance coverage for lawyers acting as executor or trustee – practicePRO: Availability of insurance coverage for lawyers acting as executor or trustee – practicePRO ↵
- R.S.O. 1990, c. P.5 ↵
- McKnight v. Hutchison, 2002 CarswellBC 2289, 2002 BCSC 1373, (2002) B.C.J. No. 2211, (2003) B.C.W.L.D. 50, 117 A.C.W.S. (3d) 158, 28 B.L.R. (3d) 269. ↵
- Ibid. ↵