"COMPARE CAREFULLY" SAYS ADELAIDE SOLICITOR
Trustee Company –v- Solicitors

South Australians who accept offers of "free" Wills and agree to Trustee Companies becoming their executors may find their estate whittled away through high fees.

Adelaide Solicitor Jeremy Duffy of Johnston Withers, Barristers & Solicitors, said this week that legislation passed by the State Parliament a few months ago to add the Goods & Services Tax (GST) to Trustee Companies’ services highlighted the high cost structure of Trustee Company fees. Trustee Companies usually charge on the basis of a fixed percentage of the gross value of the estate. Solicitors, on the other hand, charge on the basis of the work actually performed. The difference in many estates can amount to thousands of dollars.

Trustee Companies, particularly Public Trustee, hold the Wills of and act as executors for a vast number of South Australians.

Mr Duffy said that:

"For both small and large estates, an estimate of costs from a Solicitor practising in the administration of estates is a strongly recommended course of action before deciding who should prepare the will and who should be appointed as executors.

I am surprised that so many people believe that a free or cheap will is actually a saving. For far too many people, the real cost of such a will is many thousands of dollars in avoidable fees."

The following examples indicate the difference in fees charged by Trustee Companies and Johnston Withers:-

Example One
Mary has survived her husband. She owns a house, furniture and has a modest amount of money in the bank. Naturally, Mary wants to ensure that her children receive as much of her estate at her death as possible. Let’s look a the best way for Mary to do this.

Firstly, let’s see what her assets are worth:

Now, let’s compare the fees that we would charge to administer Mary’s estate as opposed to Public Trustee (1).

Johnston Withers (2): $2,000.00 plus $200.00 G.S.T. = $2,200.00
Public Trustee (3): $7,000.00 plus $700.00 G.S.T. = $7,700.00

The difference, i.e. $5,500.00, is like a death duty - money Mary’s beneficiaries never get.

Example Two
Henry is a retired person with a reasonably large estate:

The nett estate is $500,000.00. Don’t forget though that a Trustee Company assesses its commission on the gross estate.

Once again, let’s compare the estimated fees charged by us as opposed to a Public Trustee.

Johnston Withers (4): $6,000.00 plus $600.00 G.S.T. = $6,600.00
Public Trustee: $13,000.00 plus $1,300.00 G.S.T. = $14,300.00

The difference is $7,700.00, a significant slug for Henry’s beneficiaries.

The percentage commission charged is, of course, a much larger percentage of the nett estate (that is, what Henry’s estate is actually worth) than it is of the gross estate on which it is assessed.

Example Three
It is not uncommon for small business proprietors to own assets which are very valuable, but which are also highly geared, i.e. they owe lots of money to banks against the value of those assets.

What happens in such a case?

Let’s assume that Tom is a middle aged successful small business owner and is married with three children, all under the age of ten. This business is in his name, although everything else is in joint names with his wife. His position is this.

The fees?

Johnston Withers (4): $6,000.00 plus $600.00 G.S.T. = $6,600.00
Public Trustee: $19,000.00 plus $1,900.00 G.S.T. = $20,900.00

The difference of $14,300.00 certainly eats into the $200,000.00 equity in the business!

Trustee Companies also usually charge a percentage fee on all income received into an estate. This can significantly increase the overall costs of the administration of estates by Trustee Companies. Public Trustee, for example, charges 5% on income and 7.5% on rents received into an estate.

Mr Duffy said that one of the most important factors is the freedom of clients to choose who they wanted to be the executor of their Will. Johnston Withers rarely accepted the role of executor, preferring to receive instructions from executors appointed in the Will who were, in most instances, family members or trusted friends.

These people are helped through the process by Johnston Withers. Our experience is that this partnership between solicitor and executors works very well and keeps the costs of the administration of the estate to a minimum.

At Johnston Withers, we are also able to provide advice on a range of other legal and estate planning matters not available from Trustee Companies.

In all examples -
(1) excluding Government and third party fees and charges
(2) an approximation based on our experience and a recent examination of our files in similar estates
(3) based on Public Trustee's published commission rates - other Trustee Company's rates may vary.
(4) it would depend substantially on the complexity of the business and its disposal.