By James Russell with Jessica Landry
When someone passes away, the person appointed to manage that person’s affairs is called a Personal Representative. This is the general term given to an Executor named in a Will, or an Administrator appointed by the Probate Court where no valid Will exists, or when there is no Executor named in the Will who is able, or willing, to act. The Personal Representative is responsible for a variety of matters in settling a person’s Estate. They are often the ones involved in arranging a funeral, notifying governments and employers of the death, filing documents with the Probate Court, managing the Estate’s assets, paying the Estate’s debts, dealing with tax matters, and, ultimately, distributing the remaining assets to the beneficiaries.
While the Personal Representative is entitled to be reimbursed for all necessary and reasonable expenses they incur while acting on behalf of the Estate, they may also be entitled to compensation for their work.
As a starting point, the law states a Personal Representative is entitled to whatever compensation the deceased laid out in their Will. The Personal Representative does have the ability to reject, or “renounce”, their claim to this amount. This may be done if the Personal Representative feels they should be entitled to more compensation. It is important to note that a Personal Representative only has a limited amount of time to reject this amount, if they plan to claim a commission instead.
If no compensation is laid out in the deceased’s Will, or if the Personal Representative rejects that amount, the law states that the Personal Representative may be allowed a commission that is no more than five percent (5%) of the value of all of the property managed by the Personal Representative. Often the beneficiaries of the Estate, and the Personal Representative, can come to an agreement in determining the compensation to be paid to the Personal Representative, and agree to settle the Estate without the Court having to be involved for the final distribution. If no agreement can be reached, the Court has the authority to set, among other things, the Personal Representative’s commission.
The law states that the Court is to consider the following in determining what, if any, commission to award a Personal Representative:
1. the size of the estate;
2. the care and responsibility involved in administering the estate;
3. the time the Personal Representative was occupied in performing their duties;
4. the skill and abilities shown by the Personal Representative; and
5. the success resulting from the Personal Representative’s administration of the estate.
If more than one Personal Representative acts on behalf of an Estate, the Court may divide the commission among the Personal Representatives as the Court determines is appropriate, after considering the work each contributed to the Estate’s administration.
What if a Personal Representative is named as a beneficiary in the Will – are they entitled to the gift and compensation? The compensation a Personal Representative is entitled to is meant to be payment for their services. As such, a Personal Representative who earns compensation from this role is obligated to report this as income for tax purposes. A gift, however, is not income. Where a Personal Representative receives a gift in a Will, there is a legal presumption that the gift is to replace any compensation they would be entitled to. The Personal Representative would be responsible to demonstrate that the gift laid out in the Will is truly a gift in order to also claim a commission.
Personal Representative compensation, and claims for reimbursement of expenses, are areas where disputes often arise. It is advisable that Personal Representatives maintain detailed records, communicate often with beneficiaries, and seek legal advice.
This article is for information only and is not intended to be legal advice. If you have any questions or would like further information, you should consult a lawyer.
