Copyright 1999, 2005 Daniel B. Evans. All rights reserved.
Not Legal Advice
The most significant costs of administering an estate, and the costs most like to result in conflict between beneficiaries and the executors or administrators of estates, are the commissions paid to the personal representatives (executors or administrators) and the fees paid to their lawyers.
Personal Representative Commissions
In Pennsylvania, the compensation of personal representatives is governed by 20 Pa.C.S. § 3537, which states:
The court shall allow such compensation to the personal representative as shall in the circumstances be reasonable and just, and may calculate such compensation on a graduated percentage.
In a series of cases, culminating in Wallis Estate, 421 Pa. 104, 218 A.2d 732 (1966), the Pennsylvania Supreme Court approved a general rule that an executor’s fees of 3% of the estate under administration was “prima facie fair and reasonable.” However, the Supreme Court later pointed out that the rule was not hard and fast:
This [3%] test, however, is merely a “rule of thumb,” the true test being what the services actually were worth. Therefore, it follows that where there is evidence that the services are actually worth more or less than what is prima facie reasonable, as, for example, where the fiduciary performed extraordinary duties [citations omitted] or where the performance falls below accepted norms [citations omitted] the amount of compensation may be increased or decreased accordingly.
In re Reed’s Estate, 462 Pa. 336, 340-341, 341 A.2d 108, 110-111 (1975).
The Supreme Court has also held that compensation of executors is a matter “peculiarly within the discretion” of the Orphans’ Court, and that the determination of compensation will not be disturbed by an appellate court unless the discretion is “clearly abused.” Strickler Estate, 354 Pa. 276, 277, 47 A.2d 134, 135 (1946).
Attorney Fees
There is no statutory provision for attorney’s fees for estate administration, but it is within the inherent power of the Orphans’ Court to review the expenses paid by the personal representative and disallow any unreasonable expense, as well as supervise the conduct and compensation of lawyers practicing in the Orphans’ Court.
The Supreme Court has stated the general guidelines for the determination of attorney fees as follows:
What is a fair and reasonable fee is sometimes a delicate, and at times a difficult question. The facts and factors to be taken into consideration in determining the fee or compensation payable to an attorney include: the amount of work performed; the character of the services rendered; the difficulty of the problems involved; the importance of the litigation; the amount of money or value of the property in question; the degree of responsibility incurred; whether the fund involved was “created” by the attorney; the professional skill and standing of the attorney in his profession; the results he was able to obtain; the ability of the client to pay a reasonable fee[***6] for the services rendered; and, very importantly, the amount of money or the value of the property in question.
LaRocca Estate, 431 Pa. 542, 546, 246 A.2d 337, 339 (1968).
These are essentially the same factors that can be found in Pennsylvania Rule of Professional Conduct 1.5(a).
Like the determination of executor commissions, the determination of attorney fees “rests primarily with the auditing judge” and is a question “peculiarly within the discretion” of that judge, so that the determination of the judge will not be interfered with except for “palpable error.” Estate of Bruner, 456 Pa. Super. 705, 713, 691 A.2d 530, 534 (1997).
Johnson Estate
Determining executor commissions and attorney fees based upon the size of the estate is certainly simpler than considering a large number of factors in each case, particularly for relatively routine estate administrations and for estates in which no objections are raised to the commissions and fees claimed. The percentage method therefore appeals to judges of the Orphans’ Court, even though the Pennsylvania Superior Court has criticized the practice in opinions in Sonovick Estate, 373 Pa. Super 396 (1988), and Preston Estate, 560 A.2d 160 (1989).
One judge in Pennsylvania has published an opinion to which the judge attached a schedule of the percentages that the judge used for his own guidance in auditing the accounts of estates, and several other judges have since written opinions indicating that they use this schedule as well. So, while this schedule (reproduced below) represents at best the opinion of a few judges in a few estates, it still provide some guidance in determining the reasonableness of administration costs in other estates.
Exhibit A
Johnson Estate, 4 Fid.Rep.2d 6, 8 (O.C. Chester Co. 1983)
COMMISSIONS
|
Per Col. |
Per Total |
||||||
|---|---|---|---|---|---|---|---|
| $ |
00.01 |
to $ |
100,000.00 |
5% |
5,000.00 |
5,000.00 |
|
| $ |
100,000.01 |
to $ |
200,000.00 |
4% |
4,000.00 |
9,000.00 |
|
|
Executor or |
$ |
200,000.01 |
to $ |
1,000,000.00 |
3% |
24,000.00 |
33,000.00 |
|
Administrator |
$ |
1,000,000.01 |
to $ |
2,000,000.00 |
2% |
20,000.00 |
53,000.00 |
| $ |
2,000,000.01 |
to $ |
3,000,000.00 |
1½% |
15,000.00 |
68,000.00 |
|
| $ |
3,000,000.01 |
to $ |
4,000,000.00 |
1% |
10,000.00 |
78,000.00 |
|
| $ |
4,000,000.01 |
to $ |
5,000,000.00 |
½% |
5,000.00 |
83,000.00 |
|
1% |
Joint Accounts |
1% |
P.O.D. Bonds |
1% |
Trust Funds |
|
3% |
Real Estate Converted with Aid of Broker |
5% |
Real Estate: Non-Converted |
1% |
Real Estate: Specific Devise |
| $ |
00.01 |
to $ |
25,000.00 |
7% |
1,750.00 |
1,750.00 |
|
| $ |
25,000.01 |
to $ |
50,000.00 |
6% |
1,500.00 |
3,250.00 |
|
| $ |
50,000.01 |
to $ |
100,000.00 |
5% |
2,500.00 |
5,750.00 |
|
| Attorney | $ |
100,000.01 |
to $ |
200,000.00 |
4% |
4,000.00 |
9,750.00 |
| $ |
200,000.01 |
to $ |
1,000,000.00 |
3% |
24,000.00 |
33,750.00 |
|
| $ |
1,000,000.01 |
to $ |
2,000,000.00 |
2% |
20,000.00 |
53,750.00 |
|
| $ |
2,000,000.01 |
to $ |
3,000,000.00 |
1½% |
15,000.00 |
68,750.00 |
|
| $ |
3,000,000.01 |
to $ |
4,000,000.00 |
1% |
10,000.00 |
78,750.00 |
|
| $ |
4,000,000.01 |
to $ |
5,000,000.00 |
½% |
5,000.00 |
83,750.00 |
|
½% |
Regular Commission P.O.D. Bonds and Trust Funds |
3½% |
Transfer Joint Accounts |
3½% |
Assets Which Are Taxable at One Half Value |
|
1% |
Non-Probate Assets up to $1,000,000 |
1% |
Non-Probate Assets | Joint Accounts Fully Taxable: Full Commission |