Charities may sometimes find that an estate of which they are a beneficiary is saddled with an alleged debt owed to (i) the testator’s attorney under an LPA (Lasting Power of Attorney) or (ii) the executors.
What rights do attorneys and executors have to charge for their time, and what can a charity do to challenge their costs?
- Without express authority under an LPA, an attorney is not entitled to charge for time spent. They may claim for expenses, however.
- The Mental Capacity Act 2005, as supplemented by the Code of Practice, does not authorise attorneys to charge for time spent, and, as fiduciaries, attorneys are not entitled to charge for time spent, unless the donor has agreed in advance.
- Where the donor has given authority to charge for time spent, the authority should be provided for in the document recording their appointment, ie, LPA. This is rather unusual however and will only normally apply where a very wealthy donor appoints a professional to act as their attorney.
- The position with Deputies (ie, persons appointed by the Court of Protection to act for someone lacking capacity) is usually different, and they will normally be authorised to be paid for time spent. This can be checked by looking at the Court of Protection Order confirming the appointment of the Deputy.
- The position is similar with regard to executors and administrators of estates. So executors and administrators are generally not entitled to charge for anything other than out of pocket expenses.
- As with LPAs, the will might provide that the executor can charge for their time however.
- Where the will appoints trustees of a will trust, the lack of a charging clause may not prohibit the trustee for charging for their time. If the trustee who is appointed acts in a professional capacity (ie, he is a professional trustee), he can charge reasonable remuneration for any services provided if all co-trustees agree (he cannot charge if he is a sole trustee).
- Executors and administrators may, however, of course instruct solicitors (and other professionals) to provide advice on the administration of an estate and may pay for that advice out of the estate.
So how does this affect charities?
- If on the death of the donor, there is an alleged debt to an attorney, and that debt reduces the benefit to the charity, the charity might seek to challenge the debt if the charity considers that the attorney had no right to charge for their time. The same principle applies to executor costs.
- How will the charity find out if there are any attorney / executor costs? The best course is for the charity to seek copies of the estate accounts from the executor / administrator. Any refusal might be met by a reference to the executor’s / administrator’s duty to account to the beneficiaries.
- As a first step, the charity should write to the executor of the donor’s estate, and alert them to the costs which the charity seeks to challenge, as the right to challenge debts allegedly owed by the deceased will vest in the executor.
- If the executor refuses to consider such a challenge, for example because the executor was the attorney / executor who has incurred the charges, then the charity might seek the removal of that executor, and the replacement of the executor with a professional administrator.
- The grounds of that application might be the conflict of interest between the executor’s interest (and duty) in recovering debts of the estate, and the interest of the executor in seeing that purported debt paid to him personally.
- A cost benefit analysis will need to be undertaken to ascertain if a challenge is worth the time and costs to the charity.
If you require further information about anything covered in this briefing, please contact Joseph de Lacey or your usual contact at the firm on +44 (0)20 3375 7000.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, April 2023