Legality of Executor and Lawyer Percentage with Home Reverse Mortgage?

[davidhunternyc]

What is the name of your state? California

Hello,
Please, I need all of your help and I can not afford to hire a lawyer but I am hoping I can get some legal experts to weigh in here. A couple of years ago my mother passed away. I come from one those families where things only get worse from here. My mother had a reverse mortgage on her house. I'm thinking around 40% of her house was owned by the bank but the final accounting of her estate shows nothing. I do know that house sold for $760,000. Both the executor and lawyer took 1.5% of the gross sale of the house even before the bank was payed back. Is this legal? I just got a final accounting of my mother's estate and I did not get bank statements, receipts, nothing. I live in NYC and the executor, lawyer, and the rest of my family lives in California. Any help would greatly be appreciated.
Thank you.

 

[TrustUser]

most likely, all 3 entities were paid at the same time, thru normal escrow procedures (executor, lawyer, and bank)

 

[davidhunternyc]

But what is the legality of taking 1.5% on the “gross” sale of the house before the bank was paid back?

 

[TrustUser]

like i said, all entities were probably paid back at the same time

 

[TrustUser]

dont confuse "method payment calculation" with order of payment

most commissions in normal sales are based upon the gross agreed to price

 

[davidhunternyc]

What is the method payment calculation for executor and lawyer fees on a house with a reverse mortgage?

 

[TrustUser]

i doubt if this was any different than what would normally occur in a sale. assuming there was 60% owner's equity, there would be plenty of funds to pay off everyone completely. and then your mom's estate would have gotten the remainder.

my guess is that a reverse mortgage would not affect executor and lawyer fees at all. any more than any other mortgage would affect a commission fee.

 

[davidhunternyc]

The executor and the lawyer each took 1.5% of $760,000. But if $460,000 went to the estate after the bank was payed back, why didn't the executor and lawyer take 1.5% of $460,000 instead of $760,000?

 

[TrustUser]

because commission fees are generally not calculated that way

 

[davidhunternyc]

Is the executor and lawyer fee a commission fee? It's my mom's house and my brothers and I are the beneficiaries. Why is the executor and lawyer entitled to a commission fee? How are executor and lawyer fees calculated?

 

[TrustUser]

i am more familiar with trusts, than i am with wills. in a trust, it is common for the trust document to talk about trustee fees.

why wouldnt the executor and lawyer be entitled to a fee for their work ?

 

[Taxing Matters]

The executor and the lawyer each took 1.5% of $760,000. But if $460,000 went to the estate after the bank was payed back, why didn't the executor and lawyer take 1.5% of $460,000 instead of $760,000?

In California, both the executor and the lawyer may by statute take fees based on the value of the gross estate based on the following schedule:

• 4% of the first $100,000 of the gross value of the probate estate
• 3% of the next $100,000
• 2% of the next $800,000
• 1% of the next $9 million
• .5% of the next $15 million
• A reasonable amount (determined by the court) for any amounts higher than $25 million.

The gross value of the estate is the value before taking into account the debts of the estate, like mortgages. Whether the 1.5% was the right figure would depend on the total value of the estate, but it certainly could have been the right figure. Note that they don't have to take the statutory maximum that I listed above, but they often do because they make a lot more that way than billing by the hour. This is one reason why probate in California can be significantly more expensive than it is in some other states. That is one reason why probate alternatives like living trusts, pay on death beneficiary designations, joint ownership of assets, etc., are very popular in California.

 

[TrustUser]

hi tm, thanks for re-affirming my like for trusts - LOL

 

[davidhunternyc]

Thank you both for your contribution to my questions. The executor and lawyer are entitled to a fee for their work. My only question is whether their fee should be based on the gross $760,000 sale of the house or on the $460,000 that was moved to the trust after the reverse mortgage was payed back to the bank. Even though I'm a beneficiary I am not swayed to any side. I just don't know. I am not a lawyer. I just want the right thing to be done regardless. All I got was a summary of my mom's estate without bank statements nor receipts. It's awful, because she is dead and I have no idea what was in her estate.

By the way, I think that the gross value of my mom's estate was $1 million. Is the executor and lawyer each entitled to 1.5% (3% between the two of them) of gross value, including IRA's and house?

 

[TrustUser]

i think we could have a separate discussion on how things should be. i am of the personal opinion that people get a lot more than they should, which is just one of the reasons why i would not have a will

however, if we look at the work being done, it generally has nothing to do with whether there were debts to be paid. for example, a realtor (even if vastly overpaid for the skill that he/she has) does the same amount of work, whether or not a home is owned free and clear, or whether it has a mortgage associated with it.

so while we could discuss the "value" of someone's work, the value would not generally depend on whether there were debts or not