Personal Rep and Successor Trustee Compensation in Michigan
Posted 26 December 2012 - 09:50 PM
Posted 27 December 2012 - 07:59 AM
Posted 27 December 2012 - 08:13 AM
Section 700.3719 of the Michigan Compiled Laws provides as follows:
(1) A personal representative is entitled to reasonable compensation for services performed. A personal representative may pay the personal representative's own compensation periodically as earned without prior court approval.
(2) If an attorney serves as personal representative, the attorney shall maintain time records that state the identity of the person performing personal representative services, the date the services are performed, the amount of time expended in performing the services, and a brief description of the services. Upon request of an interested person affected by payment of personal representative fees, the attorney shall send the time records to the interested person.
(3) If a will provides for the personal representative's compensation and there is no contract with the decedent regarding compensation, the personal representative may renounce the provision before qualifying and be entitled to reasonable compensation. A written contract between the decedent and the personal representative regarding compensation for estate settlement services is binding on the personal representative.
(4) A personal representative also may renounce the right to all or a part of the compensation. A written renunciation of fee may be filed with the court and shall be served on all affected interested persons.
Similarly, Section 700.7708 provides as follows:
(1) If the terms of a trust do not specify the trustee's compensation, a trustee is entitled to compensation that is reasonable under the circumstances.
(2) If the terms of a trust specify the trustee's compensation, the trustee is entitled to be compensated as specified, but the court may allow more or less compensation if either of the following apply:
(a) The duties of the trustee are substantially different from those contemplated when the trust was created.
(b) The compensation specified by the terms of the trust would be unreasonably low or high.
Determining what is "reasonable" will require examination of all relevant facts and circumstances, including the nature and quantity of the assets owned by the estate or trust, and, in the case of a trust, the extent to which the trustee's duties include more than the mere liquidation and distribution of assets and payment of debts.
Posted 27 December 2012 - 07:35 PM
Posted 28 December 2012 - 07:49 AM
What is a range of reasonable rates? Does it start at $50 an hour since I have liability to the beneficiaries? Is it more per hour?
The second question above seems to tie the personal representative ("PR")/trustee's liability to the beneficiaries (by which I assume you're referring to fiduciary duties) to a $50 hourly rate, but I'm not sure where you are coming up with that correlation. You also seem to be assuming that compensation is going to be based on an hourly rate, and I don't think that's a reasonable assumption (in part because most persons who serve in these capacities do not keep track of the time spent).
As I said in my prior response, "[d]etermining what is 'reasonable' will require examination of all relevant facts and circumstances." Dealing with banks and stockbrokers is generally neither difficult nor time-consuming, and it typically matters not whether the banks are local or in other states. What matters is what you had to do. In most cases, only some minimal correspondence and filling out of forms is required. Selling real property is generally done by hiring a realtor/real estate agent.
What I can do is give you an example from a state that sets a formula for presumptive compensation. In California, the PR of a decedent's estate is presumptively entitled to 4% of the first $100k in value of the estate, plus 3% of the next $100k, plus 2% of the next $800k, plus 1% of the next $9M, plus .5% of the next $15M, etc. See Cal. Probate Code Section 10800(a). "[T]he [probate] court may allow additional compensation for extraordinary services by the personal representative in an amount the court determines is just and reasonable." Cal. Probate Code Section
I think $20 a hour is way too low with the size of the estate.
It is illogical tie the hourly rate to the size of the estate. The size of the estate typically affects how much time the PR/trustee must spend administering the estate/trust. The more time spent, the higher the number by which the hourly rate is multiplied. It would be more logic to determine the hourly rate with reference to the particular tasks involved. Filling out bank and stockbroker forms and signing common real estate sale documents requires no particular skill or training and would not justify a particularly high hourly rate. On the other hand, if the tasks performed required particular skill or training/education, or if you were required to exercise your judgment with respect to particularly complex matters, that might justify a higher rate.
I have the personal tax return and the estate tax return for a 2 million dollar estate.
In your original post, you mentioned a $100k estate and a $1.8M trust. Now you're referring to a $2M estate. Those numbers are inconsistent.
Nevertheless, if you were to use the California presumptive rates I mentioned above, a $2M estate would result in a presumptive entitlement of $33k. With the $50 hourly rate you mentioned, you would have had to have spent 660 hours (which is roughly the equivalent of 3.8 months' full-time work or about 12.5 hours per week for a year) to earn $33k. Did you spend that much time? Just as you may not legally gorge the estate for your personal benefit, neither do you want to short-change yourself.
It is my personal opinion that administering an estate or trust is not a good do-it-yourself project, and administering an estate or trust valued in the seven figure range without counsel is downright foolish. At the very least, spending a few hundred dollars to consult with a local probate attorney about reasonable compensation would be a good investment, and I suggest you do so.
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