In New Zealand, the general rule is that an executor cannot charge for their time unless there is a specific clause in the will allowing them to do so. However, executors are entitled to reimbursement for their reasonably incurred expenses.
Executors’ ability to charge for their time
An executor is usually expected to act without payment. They are only able to charge for their time in three circumstances:
- When the will allows it – If the will includes a charging clause, the executor can be compensated for their time. This clause must clearly state that the executor is entitled to payment for their services. Beneficiaries should check the will for such a clause to understand if the executor can legally charge for their time. It is common in New Zealand for wills to allow professionals, such as accountants or lawyers, to charge for their time.
- By agreement with the beneficiaries – In cases where there is no charging clause, the executor and the beneficiaries can agree that the executor will be compensated for their time. This agreement should be documented to ensure it is legally binding. Beneficiaries should be aware that they have the right to negotiate and agree on what they consider a fair charge for the executor’s services.
- With Court approval – Even without a charging clause or an agreement with the beneficiaries, the Court may allow the executor to charge for their time, particularly if they are acting in a professional capacity. These situations are exceptions and would require the executor to justify their claim to the Court.
If the executor is authorised to charge for their time, the amount charged must still be reasonable. Beneficiaries can apply to the court to review the charges if they believe they are unreasonable.
Executors’ right to reimbursement
While executors typically cannot charge for their time, they are entitled to be reimbursed for reasonable expenses incurred in administering the estate. These expenses must be directly related to the duties of the executor and deemed reasonable in the circumstances.
Examples of reasonable expenses
Typical expenses that are considered reasonable include
- Legal fees: Costs associated with obtaining probate and other legal services necessary for estate administration.
- Real estate agent’s commission: Fees for selling the deceased’s property.
- Cleaning services: Charges for cleaning the property to prepare it for sale.
- Funeral costs: The costs of the funeral, cremation or burial, and headstone. For more information, read the article on who pays the funeral costs in New Zealand.
These expenses are legitimately covered using the estate’s funds, ensuring that the executor is not personally out of pocket for necessary costs incurred while performing their duties.
Examples of unreasonable expenses
Not all expenses claimed by an executor will be considered reasonable. Examples of expenses previously found to be unreasonable include:
- Business class airfares: Only economy class airfares are typically deemed reasonable.
- Expensive hotel accommodation: Modest accommodations, such as motels, are considered reasonable if necessary for the administration of the estate.
- Meals and entertainment: Costs for lunches, dinners, or other personal expenses are not recoverable by the executor as they are not directly related to estate administration.
Beneficiaries should scrutinise the expenses claimed by the executor to ensure they are reasonable in amount and were necessary for the administration of the estate. If there are concerns about unreasonable expenses, beneficiaries have the right to challenge these claims.
Legal recourse for beneficiaries
An executor has a fiduciary duty to act in the best interests of the estate and its beneficiaries. This includes maintaining proper estate accounts and providing transparency regarding the administration of the estate.
Beneficiaries are entitled to request a copy of the estate accounts to review the financial transactions made by the executor. There is a presumption that these will be provided to beneficiaries upon request. This ensures that beneficiaries can monitor the executor’s management of the estate and raise any concerns about potential mismanagement or misconduct.
If an executor fails to provide the estate accounts, beneficiaries can apply to the High Court for an inventory and account of the estate. If granted, this legal action compels the executor to disclose detailed financial records, ensuring accountability and transparency.
If there is evidence of inappropriate charging to the estate, beneficiaries can make a claim to hold the executor to account. For more information, read the comprehensive guides to executor misconduct claims and removing an executor.
Conclusion
In New Zealand, executors are generally not allowed to charge for their time unless specifically permitted by the will or agreed upon with the beneficiaries. They can, however, be reimbursed for reasonable expenses incurred during the administration of the estate. Beneficiaries have the right to request estate accounts and challenge any unreasonable expenses. Understanding these rights helps beneficiaries ensure that the estate is managed properly and their interests are protected.