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HomeMy WebLinkAbout04-08-11IN RE: WARREN P. WICKWIRE Deceased AUDITOR' R PORT AND NOW, comes Robert G. Frey, and makes the following report as appointed Auditor in the above-captioned matter. ISSUE TO BE RESOLVED It was agreed by counsel for the Executrix and counsel for W. Peter Wickwire, Jr. at a pre-audit conference that the sole issue to be resolved is the setting of reasonable fee for the services of the Executrix in settling the Estate. In particular, Mr. Wickwire objects to the statement by the Executrix of the duties performed by her and to the means of calculating the Executrix fee that was charged on the First and Final Account. FINDINGS OF FACT c_~; 1 • Warren P. Wickwire, hereinafter referred to as "the Decedent," died on October 7, 2009 survived by his wife and six children. Said children include the Executrix, Paula Sylvester, and the objecting party, W, peter Wickwire, Jr., hereinafter referred to as "the Objectant." 2. Paula Sylvester, hereinafter referred to as "the Executrix" was appointed Executrix of the Last Will and Testament of Warren P. Wickwire, her late father, on November 20, 2009. 3. The Decedent was survived by his spouse and six children, including the Objectant and the Executrix. IN THE COURT OF COMMON PLEAS OF :CUMBERLAND COUNTY, PE~ISYLVIA `© ORPHANS' COURT DIVISIOI~~n ' ~~m t NO. 21-09-1082 ~ cri ~ ~' ~~O ->' ~~ r~o-~, ~~ a _, ~~ -V~ ~, ,,.c~ -; .---, ~, ~~ . rr -~7 i F ``i - T~i ~`_ :Ti ~~ p -n ti, 4. Decedent's spouse suffers from dementia and is a full-time resident in a skilled care facility. 5. In connection with the settlement of the estate, the Executrix filed with the Register of Wills a Pennsylvania Inheritance Tax Return and a First and Final Account. 6. As reported in the filings, the assets of the estate consisted of various savings and checking accounts and certificates of deposit with three different credit unions, .and one brokerage account which consisted of investments in stocks, bonds and mutual funds. 7. The estate had assets as of the date of death totaling more than $800,479.01. Additionally, the First and Final Account reports gains on the sale of assets and income of over $20,000.00. 8. Both the Pennsylvania Inheritance Tax Return and the First and Final Account reported a fee payable to the Executrix in the amount of $30,000.00. 9. In addition to the probate assets, the Inheritance Tax Return reported taxable lifetime transfers by the Decedent of $155,895.07. 10. The Inheritance Tax Return was accepted as filed by the Pennsylvania Department of Revenue. 11. The Objectant is the only heir that has filed objections to the First and Final Account. 12. No evidence was presented alleging improper acts by the Executrix or that any assets were wasted by the Executrix. 13. The Executrix undertook the settlement of the Decedent's estate which included: a. Consulting with two separate attorney's and negotiating an attorney's fee for representation in the settlement of the estate that was more favorable than an initial quote, but which required the Executrix to perform more of the tasks herself. b. Gathering the Decedent's records and financial statements. c. Appearing before the Register of Wills to present the Petition for Probate. d. Paying an estimate of the Inheritance Tax obligation within 90 days of the date of death to take advantage of the discount in the amount of $1,932.91. e. Reviewing and signing Inheritance Tax return with the assistance of counsel and an accountant. f. Reviewing and signing the private accounting. g. Talking with the Objectant to attempt to resolve his objections and his refusal to sign a waiver and release that had been prepared. h. Sending emails at various times to the heirs to update them on the status of the estate. i. Paying estate expenses. j. Researching and reviewing the Decedent's investments to make an informed decision on which assets should be liquidated and the timing for liquidation. k. Overseeing the inventory of personal property and its disposition. 1. Authorizing changes in billings so that the Estate would have no further obligation. 14. To perform her duties, the Executrix took some time off work and rearranged her work schedule. 15. Although there was evidence submitted that the settling of the estate was a significant responsibility given its size, no evidence was submitted or allegations made that the estate was more complicated than a typical estate of its size or that extraordinary efforts were required to complete the settlement. 16. The Objectant testified that he felt much of the tasks performed by the Executrix were in her capacity as agent for her mother pursuant to a. power of attorney and were not the responsibility of the executor of an estate. 17. Murrell R. Walters, III, Esquire testified as an expert. He stated his opinion that: a. The estate in question was substantial in size and not simple to administer. b. The responsibilities of an executor are not easily reduced to a certain number of hours or to an hourly rate. c. A fee based on a percentage of the estate is a better means to calculate fair compensation, because, in general, the larger the estate, the greater the responsibilities. d. Based on his review of the estate, if he were representing the Executrix he would have advised her that $30,000.00 was fair compensation for her performing the duties of executrix. e. If a financial institution had been acting as executor, it likely would have charged a higher fee. 18. The fee claimed by the Executrix in the amount of $30,000.00 was claimed on a percentage basis. Brief of Executrix, page 2. 19. Based on a straight percentage calculation, the fee claimed by the Executrix amounts to 3.75% of the probate estate and 3% of the taxable estate. 20. The Auditor's statement of time is attached to this report. CONCLUSIONS OF LAW The approval of compensation of an executrix rests with the Orphans' Court. "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." 20 Pa.C.S. §3537 2. The standard for setting compensation for an executrix was set forth in In re Reed Estate, 462 Pa.-336, 341 (1993) as follows: "While as a matter of convenience, the compensation of a fiduciary may be arrived at by way of percentage, the true test is always what the services were actually worth and to award a fair and just compensation therefor. In re Williamson's Estate, 368 Pa. 343, 349, 82 A.2d 49, 52 (1951)" The burden for establishing facts which show the reasonableness of fees and entitlement to the compensation claimed is on the executor. In re Reed Estate, 462 Pa. 336, 341 (1993). 4. Asa "rule of thumb" an executor's fee based on 3% of the estate corpus is prima facie reasonable, but the fee may be increased or decreased based on what services were performed and what the services were worth. In re Reed Estate. supra. The chain of cases referenced in Reed finding a 3% commission to be reasonable ranged in size from $475,000.00 to $2,500,000.00. S. As the Supreme Court further provided guidance in In re Reed Estate, "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 (Garner's Estate, supra; Wolfsohn Estate, supra) or where the performance falls below accepted norms (Lohm Estate, 440 Pa. 268, 273-74, 269 A.2d 451, 456 (1970)), the amount of compensation may be increased or decreased accordingly.," 6. The Superior Courtin the case of , In re Estate of Preston, 385 Pa. Super. 48, 560 A.2d 160, 162 (Pa. Super. 1989) held that jointly held property should not be included as a probate asset for purposes of calculating the executor's and attorney's fee on a percentage basis. "Clearly, jointly-held property passes outside of a decedent's estate and should not be included in an estate's assets for purposes of computing an executor's commissions and an attorney's fees." In fact, the Court went out of its way to explain that such a charge was improper: "Egregious error is committed when a court awards commissions and fees simply on a percentage basis without inquiry into the reasonableness of the compensation, especially when the award is based, in part, on property not included in the decedent's estate, i.e. jointly-owned property." 7. The same reasoning that the Superior Court applied to joint assets should also apply to the inter vivos transfers in the Wickwire Estate which were subject to inheritance tax because they were made within one year of the date of death but which were not probate assets. Since these gifts were given prior to death, the Executrix had no responsibility regarding their administration or distribution. "The fees and commissions paid out of the estate of [the Decedent] should have been calculated from the total assets of the estate as reported in the first and final accounting...." In Re Preston Estate, 580 Pa. Super. At 55. 8. The total principal as reported on the first and final account was $800,479.01. A prima facie reasonable 3% executor's fee on the principal would be $24,014.37. 9. Ample evidence was presented demonstrating that the Executrix administered the estate in a timely fashion, generating income from the assets under administration, attempting to resolve the dispute with the Objectant and negotiating more favorable attorney's fees for the estate. Given the responsibilities assumed and discharged, a fee of $24,000.00 is reasonable and appropriate. 10. Since there was no evidence presented suggesting that the Executrix performed "extraordinary duties" and the evidence clearly showed that her performance did not fall "below accepted norms," there is no justification for a variance from the prima facie reasonable fee either by setting a higher fee or by calculating the fee x on a graduated percentage basis. 11. Each party has requested the award of his or her attorney fees. Because the Objectant was successful in reducing the fee charged to the estate, it is not appropriate to award attorney's fees to the Executrix. However, the $6,000.00 saving to the estate does not seem substantial enough to alter the general rule that an objecting party is responsible for his attorney's fees. RECOMMENDATION Based on the foregoing reasons, as auditor, I recommend that the Executrix be awarded a fee of $24,000.00 for the performance of her duties, that neither party be awarded their attorney's fees in connection with the objections filed, that the fees for the auditor in the amount of $2,662.50 be paid by the Estate of Warren Wickwire, that the balance after the reduction in the fee payable to the Executrix and after the payment of auditor's fees be distributed pursuant as a portion of the remainder of the estate, and that the First and Final Account be confirmed absolutely, subject to the results of the Audit. Respectfully submitted, B ~. Y• Robert G. Frey, Esquire Supreme Court Number 46397 5 South Hanover Street Carlisle, Pennsylvania 17013 (717) 243-5838 FREY & TILEY ATTORNEYS-AT LAW 5 SOUTH HANOVER STREET CARLISLE, PENNSYLVANIA 17013 ROBERT M. FREY RETIRED STEPHEN D. TILEY ROBERT G. FREY April 4, 2011 Re: Peter Wickwire Estate Audit Date Description 10/27/10 Meet with Deputy Register of Wills 11/1/10 Review file 11/1/10 Reseach and letter to counsel 12/8/10 Conference with Counsel and letter 12/8/10 Research 1/18/11 Research on expert testimony 1/19/11 Hearing 1/21/11 Review file 2/3/11 Review Memoranda submitted 2/21/11 Research and draft report 3/24/11 Review and revise draft 4/4/11 Final review and Reserch Stenographer's fee advanced Total TELEPHONE (717) 243-5838 FACSIMILE (717) 243-6441 Hours Amount 0.25 $ 43.75 0.50 $ 87.50 1.00 $ 175.00 1.00 $ 175.00 1.00 $ 175.00 1.00 $ 175.00 3.00 $ 525.00 0.50 $ 87.50 1.00 $ 175.00 2.50 $ 437.50 2.00 $ 350.00 0.75 $ 131.25 $ 125.00 $ 2,662.50 Fee calculated at the rate of $175.00 per hour