Master Rules on Estate Accounting Challenge, Finds that Some but not all the Expenses are Allowable
Delaware Fiduciary Litigation Blog
IMO the Estate of Margaret Elaine Clark, Row #163725 (July 9, 2019)
This case involved exceptions taken by a beneficiary to an estate accounting. The decedent died intestate. She was survived by her two children, a son and daughter. The son became the personal representative and the daughter filed this action taking exceptions to his accounting. In short, the daughter sought to disallow a number of entries on the accounting, reimbursement for funds that she spent on behalf of the estate, and a shifting of attorneys’ fees. The son sought approval of the accounting and authority to pay all the listed expenses, make any remaining distributions, and close the estate. After a one-day trial, Master Selena E. Molina found in favor of the daughter on some issues and in favor of son on others.
Applying Chancery Court Rule 198, the Master held that the personal representative bears the initial burden of demonstrating that the accounting was properly prepared and that the burden shifts where the exceptant seeks a surcharge. In the latter case, the exceptant must demonstrate a surcharge is warranted.
The first issue addressed by the Master was the daughter’s exception to the son’s commission of $5,000. The Master found that this “flat rate chosen by the Personal Representative” was unreasonable under the circumstances. First, it represented roughly 13.4% of the total estate. And second, the son admitted to not spending a substantial amount of time on the estate’s administration. The Master also found it relevant that there was no substantial risk or responsibility involved and that there were not any novel or difficult issues involved in administering the estate. It was also relevant that the son did not suffer any loss of business, nor were there any cognizable benefits to the estate from the son’s service. And finally, the Master took into account the fact that estate was not large and was comprised primarily of cash assets. The Master did allow a commission of $1,000, though.
The second issue was the son’s travel expenses which totaled $3,541.67. These travel expenses were the result of the three times he was required to travel to Delaware. The Master found that first two travel expenses, which were subsequently added to an amended accounting, were untimely. Because the son provided no justification for his failure to list those expenses in the first accounting, the Master disallowed those expenses.
The third issue was whether the son’s attorneys’ fees incurred in administering the estate should be disallowed. The Master held that they should be allowed in part and disallowed in part. The Master found that the fees incurred in investigating wrongful death claims, which would benefit the decedent’s heirs and not the estate, are not properly charged to the estate. Conversely, attorneys’ fees incurred in investigating pre-death survival claims (such as personal injury claims) could benefit the estate and are thus allowable. The Master also disallowed attorneys’ fees that related to a proceeding in North Carolina that had no connection to the Delaware estate. The Master further disallowed in part and allowed in part attorneys’ fees associated with this litigation. She found that where the fees benefited the estate, those fees would be allowed. Because some of those fees were incurred while preparing the amended accounting, the Master found that those fees should be disallowed. And lastly, the Master allowed all of the attorneys’ fees related to the administration of the estate’s bank account for the obvious reason that those fees were incurred for the benefit of the estate.
The fourth issue was whether the daughter’s expenses related to the funeral of the decedent should be paid to her from the estate or surcharged to the son personally. The Master found no reason for the funeral expenses to be surcharged to the son personally, but that the expenses should be paid from the estate because the General Assembly and Court have given those expenses the rebuttable presumption of being relevant, reasonable, and timely.
And lastly, the Court found that the daughter’s attorneys’ fees should not be shifted to the son because there was no bad faith exception to the American Rule that dictates that each party is responsible for its own legal fees.
