Adviser or Fiduciary: When the Firm Is the Executor or Trustee

Most probate and trust work is the firm advising the personal representatives or trustees, who hold the office and make the decisions. This page is about the different situation where the firm itself (or a partner) is named as executor in a will or appointed as trustee of a trust, and therefore holds the office. That single fact changes three things: the basis on which the firm can be paid, the client-money analysis for the money it controls, and the conflict position when it pays its own fees out of funds it holds for others.

Three questions follow, and this page works through each in turn. First, can the firm be paid? Second, how are those fees taxed, for income tax, National Insurance and VAT? Third, what is the client-money status of the estate or trust money the firm controls, and how does the firm pay itself from money it holds without crossing a line? The references to the Trustee Act 2000 below are quoted from the statute.

The Default Rule: the Office Is Unpaid

The honest baseline is that a trustee or executor cannot charge for their time by default. The office is historically gratuitous: a trustee may recover proper expenses, but is not entitled to be paid for their services unless there is authority to do so. Payment therefore depends on either an authorising provision in the instrument (a charging clause) or a statutory entitlement under the Trustee Act 2000. This is why the next two sections matter: without one of them, a firm holding the office of executor or trustee has no right to a fee at all.

The Professional Charging Clause (Trustee Act 2000 s.28)

The usual route to being paid is a professional charging clause in the will or trust instrument. A well-drafted clause entitles a professional executor or trustee to be paid out of the estate or trust for the services it provides.

Section 28 of the Trustee Act 2000 supports such a clause. Section 28(1) provides that, "Except to the extent (if any) to which the trust instrument makes inconsistent provision", the charging provisions apply to a trustee if "(a) there is a provision in the trust instrument entitling him to receive payment out of trust funds in respect of services provided by him to or on behalf of the trust, and (b) the trustee is a trust corporation or is acting in a professional capacity." Where the section applies, the professional can be paid even for services that a lay trustee could have provided, which removes an older technical restriction.

Section 28(5) defines the key term. A trustee "acts in a professional capacity if he acts in the course of a profession or business which consists of or includes the provision of services in connection with (a) the management or administration of trusts generally or a particular kind of trust, or (b) any particular aspect of the management or administration of trusts generally or a particular kind of trust, and the services he provides to or on behalf of the trust fall within that description." A note of caution from the case law: a professional can charge under a clause only for work that falls within the scope of its profession, that is, work that would ordinarily attract its professional fees.

The Statutory Default Where There Is No Charging Clause (Trustee Act 2000 s.29)

Where the instrument is silent on remuneration (no charging clause), section 29 provides a statutory default. This is the key anchor for a firm that finds itself holding an office under an instrument that does not provide for payment.

  • s.29(1) (trust corporation). A trust corporation that is not a charitable trustee "is entitled to receive reasonable remuneration out of the trust funds for any services that the trust corporation provides to or on behalf of the trust."
  • s.29(2) (professional-capacity trustee). A trustee acting in a professional capacity who is not a trust corporation, a charitable trustee or a sole trustee "is entitled to receive reasonable remuneration out of the trust funds for any services that he provides to or on behalf of the trust if each other trustee has agreed in writing that he may be remunerated for the services."
  • s.29(5) (no double provision). There is no entitlement to remuneration under s.29 "if any provision about his entitlement to remuneration has been made (a) by the trust instrument, or (b) by any enactment or any provision of subordinate legislation."

Two practical limits stand out. First, a sole professional trustee cannot use s.29(2): it needs a co-trustee, and that co-trustee's written agreement, before the professional can take remuneration. Second, the entitlement is only to reasonable remuneration, not whatever the firm chooses to charge. The Trustee Act 2000 applies its provisions to personal representatives as it applies to trustees, so a firm named as executor can rely on the same default (the verbatim wording above is the trustee text).

Charging Clause or s.29: Which Applies

The two routes are not interchangeable, and the order of the analysis matters. The starting point is always the instrument. If the will or trust contains a professional charging clause, s.28 supports it and the firm charges under the clause; s.29 is then irrelevant, and s.29(5) confirms there is no s.29 entitlement where the instrument already provides for remuneration. Only if the instrument is silent does s.29 come into play, and even then it is constrained by the sole-trustee bar and the written-agreement condition. In short: read the instrument first, fall back to s.29 second, and do not assume the firm can simply help itself to a fee because it is doing the work.

A short comparison helps. A charging clause under s.28 can authorise payment to a sole professional trustee, can be drafted to cover work a lay person could do, and binds because the testator or settlor chose it. The s.29 default is narrower: it does not reach a sole professional trustee at all, it depends on a co-trustee's written agreement, and it yields only reasonable remuneration. For a firm that frequently takes appointments, the lesson is to encourage a properly drafted charging clause at the will or trust drafting stage, so that the firm's right to be paid does not later rest on the cooperation of a co-trustee or on a court's view of reasonableness.

What "Reasonable Remuneration" and "Professional Capacity" Mean

Two statutory terms do a lot of work and are worth unpacking, without putting any pricing on the page.

"Acting in a professional capacity" (s.28(5)) means acting in the course of a profession or business that includes providing services in connection with the management or administration of trusts, or an aspect of it, where the services provided fall within that description. A firm that administers estates and trusts as part of its practice plainly acts in a professional capacity for these purposes.

"Reasonable remuneration" is remuneration that is reasonable in the circumstances for the services actually provided. There is no fixed formula. Relevant factors include the time spent, the seniority and expertise of the people doing the work, the complexity and value of the estate or trust, and the responsibility involved. The court can assess reasonableness if it is challenged, so the basis on which a fee is built should be recorded and defensible.

The Client-Money Status of the Estate or Trust Money the Firm Controls

The fee is one thing; the estate or trust money is another. Money the firm holds as executor or trustee is client money under SRA Accounts Rule 2.1(c), which covers money held "as a trustee or as the holder of a specified office or appointment". Executor and trustee money the firm controls sits squarely within that limb.

So the full client-account discipline applies: a separate client account named to include the word "client"; one ledger per estate or trust; the Rule 3.3 banking-facility prohibition; the Rule 7 fair-interest duty; the Rule 8.3 five-weekly reconciliation; and, where the trigger is met, a Rule 12 accountant's report (with the Rule 12.2 exemption available only where all the client money held stayed within an average not exceeding £10,000 and a maximum not exceeding £250,000). For the underlying mechanics see our solicitor trust accounting guide and the sibling page on the probate and estate administration client account; for the broader definition see what counts as client money for UK solicitors. Where the firm also acts as attorney or deputy for a living person, the same Rule 2.1(c) status applies, as covered in attorney and deputyship receipts accounting.

The reason to be precise about this is that the firm is one of the few situations where the same organisation both holds the client money and is paid out of it. In an ordinary retainer the client controls their own money and the firm bills them; here the firm controls the estate or trust funds directly. That makes the client-money discipline not just a compliance formality but the principal protection for the beneficiaries, which is why the conflict point in the next section matters so much.

The Conflict Point: Paying Your Own Fees From Money You Control

This is the sharp practical risk and the real differentiator for a firm-as-fiduciary. When the firm is both the office-holder (controlling the funds) and the service provider (billing for the work), it is, in substance, paying itself out of money it holds for others. That demands rigour.

  • A valid authority to charge: a charging clause (s.28) or the s.29 default with the co-trustee's written agreement in place.
  • Reasonable fees, evidenced against the work done.
  • Transparent estate or trust accounts the beneficiaries can scrutinise.
  • A delivered bill before any transfer from client account to office account, with the withdrawal being for the purpose for which the money is held (Rule 5.1(a)).

This is where beneficiary disputes and SRA attention concentrate, because the firm controls the money it is being paid from. The SRA Principles and Code expect a conflict of this kind to be managed openly rather than buried. Visible governance is the protection: if the authority, the reasonableness and the bill are all documented and the accounts are open, the firm is in a far stronger position if a beneficiary questions a fee.

Tax of the Fees: the Firm's Trading Income

The executor or trustee remuneration the firm earns is its professional trading income, not a capital receipt. How it is taxed follows the firm's structure:

  • For a partnership or LLP, the fee is part of the firm's trading profit, allocated to the partners and taxed on them as income tax plus Class 4 NIC through self-assessment.
  • For a company or ABS, the fee is within the corporation tax charge.

The fee is recognised under normal revenue-recognition and work-in-progress rules as the work is done, the same as any other professional fee. There is nothing special about its income-tax character simply because the firm holds an office; what is distinctive is the source of the money it is paid from. For the structural tax position, see our guides on law firm partnership tax and the firm's wider VAT accounting in the solicitor VAT accounting guide.

One timing point is worth drawing out. The income is recognised as the work is done, not when the firm finally draws the fee from the estate or trust. On a long estate administration or a multi-year trusteeship, the firm may carry unbilled work in progress on its balance sheet, and that work in progress is brought into the firm's taxable profit as it is recognised under the accruals basis, in the same way as the firm's other matters. The fact that the cash sits in the firm's own client account, controlled by the firm as office-holder, does not accelerate or defer the income recognition: recognition follows the work, and the transfer of cash follows a delivered bill. Keeping the two apart in the firm's records, the recognised income on one side and the client money on the other, is what keeps the tax position and the client-account position both clean.

VAT on Executor and Trustee Fees

The fees are a standard-rated supply of services for VAT at 20% (rate at June 2026); there is no exemption. The firm charges VAT on its executor or trustee remuneration like any other professional fee. A firm with taxable turnover below the £90,000 registration threshold (from 1 April 2024) does not charge VAT.

Two points are easy to miss. First, the VAT is accounted for at the tax point on the bill, not simply when the firm draws the money from the estate or trust funds it controls; controlling the money does not move the tax point. Second, disbursements within the estate or trust follow the eight-condition test in VAT Notice 700 section 25.1.1, so they are treated on their facts rather than assumed to be VAT-free. For the disbursement and probate-fee VAT detail, see VAT on probate and estate administration fees and disbursements and VAT treatment for UK law firms.

Worked Example: Named Executor With a Charging Clause

This example is illustrative only and is not advice; the figures are not a fee quote.

A will names the firm as executor and includes a professional charging clause. The firm administers the estate, and the position runs as follows:

  1. The basis to charge. Under s.28 the firm, acting in a professional capacity, may be paid for its services administering the estate, because the will entitles it to payment and makes no inconsistent provision. The clause authorises the fee.
  2. The money is client money. The estate money the firm controls is client money under Rule 2.1(c). The firm opens one ledger for the estate, banks the money in its client account, accounts for fair interest under Rule 7, and reconciles every five weeks under Rule 8.3.
  3. The fee is billed before it moves. The firm delivers a bill for its reasonable fee. Only then does it transfer the billed amount from client account to office account, the withdrawal being for the purpose for which the money is held (Rule 5.1(a)).
  4. The fee is taxed and carries VAT. The fee is the firm's trading income (income tax plus Class 4 NIC via the partners, or corporation tax for a company). The firm adds VAT at 20% (rate at June 2026) if registered, accounting for it at the tax point on the bill.

Now vary the facts: the instrument has no charging clause and the firm is one of two professional trustees. The firm can be paid only under s.29(2): it is acting in a professional capacity, it is not a sole trustee, and the other trustee agrees in writing that the firm may be remunerated, with the remuneration being reasonable. A sole professional trustee in the same position could not use s.29 at all. The caption: the charging clause (or the s.29 written agreement) authorises the fee, but the client-money rules still govern the money.

Practical Governance and Records

Because the firm is paying itself from money it controls, the records have to carry the weight. Good practice includes:

  • Maintaining estate or trust accounts the beneficiaries, and the SRA accountant's-report reviewer, can scrutinise.
  • Documenting the authority to charge: the charging clause, or the co-trustee's written agreement under s.29.
  • Keeping the fee bills, the basis on which the fee is reasonable, and the client-ledger reconciliation.
  • Retaining records for at least six years, in line with the SRA Accounts Rules.

These records do double duty: they support the firm's tax and VAT position on the fee, and they answer the conflict question if a beneficiary or the SRA asks how the firm justified paying itself.

A final structural point: holding offices of this kind is a long-tail commitment. A trusteeship can run for many years, and an executorship can outlast the partner who accepted the appointment. When partners join, retire or the firm restructures, the question of who holds the office, and who is therefore answerable for the client money and the fee, should be tracked deliberately rather than left to drift. Succession of fiduciary appointments interacts with the firm's wider succession planning, so it is worth reviewing alongside any change in the firm's ownership or structure. The fee tax follows the firm that earns it at the time, but the responsibility for the money follows the office-holder, and the two should not be allowed to fall out of step.

Speak to a Specialist

Acting as a professional executor or trustee puts the firm in a dual role: office-holder and fee-earner at once. The basis to charge (a charging clause under Trustee Act 2000 s.28, or the s.29 default with its sole-trustee and written-agreement limits), the income tax and VAT on the fee, and the client-money discipline over the estate or trust funds all need to line up, with governance that a beneficiary could see. Speak to a legal-sector-specialist accountant who can review your authority to charge, your fee tax and VAT, and the client-account records that govern the money you control.