This blog was written by Paula Lester – Estate and Trust Consultant with Scotia Wealth Management
When the four executors of Leona Helmsley’s $5 billion estate asked for payment of $100 million for their services, it was touted as being astronomical by the challenging Attorney General. Still, Manhattan Surrogate’s Court Judge Nora Anderson recently ruled to allow the fees, which, although admittedly enormous, were considered justified based on the complexity of the estate. The administration of Helmsley’s estate took nearly seven years, throughout which the executors had to deal with lawsuits from former employees, challenges to the Will, coordinating the sale of mega properties, a trust for Helmsley’s dog, and payments to numerous beneficiaries including charities.
The executors’ fees in this case represented only 2% of the value of Helmsley’s Estate. Apparently, Helmsley’s Will specifically stated that the executors should not be paid the usual 4% (for New York), which would have amounted to approximately $200 million. Keep in mind that, in Ontario, the ordinary executor fee is 5% of the value of the estate.
Still, the executor fees, which amounted to $25 million for each of the four executors, represented the sum of $3.6 million per year per executor. Is this reasonable?
The value behind the executor’s role is not easy to quantify. Executors must wear a multitude of hats, coordinating all types of experts: appraisers, maintenance workers, lawyers, accountants, house sitters, real estate agents, and financial advisors, to name but a few. They must communicate with often disgruntled beneficiaries and risk being liable for legal or other fees where there are challenges made to the estate or to their authority. They must dedicate significant time to managing every asset of the estate or face potential liability for failure to do so. The role is taxing and thankless and likely to consume both inordinate amounts of time as well as mental energy.
I was recently contacted by an individual who managed an estate which, originally worth $3.2 million, had seen the value of the assets shrink to $2.6 million. The beneficiaries of the estate were arguing that the executor’s negligence was responsible for the decline in value and that he therefore was liable to repay the difference. This is but one example of the dangers faced by an executor.
Now, imagine being liable for the maintenance of a $5 billion estate!