I agreed to be the executor of my mother’s estate, which has proven to be a considerable amount of work. That said, I was surprised when my wife and several others commented that I would be receiving an executor’s fee for my troubles. This fee would be extracted from the estate before the proceeds are divided for the final pay out. I did some investigation and found the following extract from an Ontario law firm.
In Ontario, the entitlement of an Executor to compensation for his or her efforts on behalf of the Estate is statutory in nature. Specifically, Section 61(1) of the Trustee Act provides that “A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice.”
Certain criteria have been applied in many Ontario cases when fixing the compensation of Executors. In Re Toronto General Trust and Ontario Central Railway, the court considered the following five factors in setting the Executor’s compensation:
- magnitude of the Estate;
- care, responsibility and risks assumed by the Executor;
- time spent by the Executor in carrying out his or her responsibilities;
- skill and ability required and displayed by the Executor; and
- results obtained and degree of success associated with the efforts of the Executor.
Although the above factors provide some guidance in terms of what criteria should govern the calculation of Executor’s fees, they do not provide a clear method for arriving at a value for the Executor’s compensation. Hence, in an effort to develop some consistency and predictability in the determination of Executor’s compensation, a court recognized guideline has evolved. It must be recognized that this is only a guideline and is subject to increase or decrease in appropriate circumstances and may also be disregarded altogether in favour of another approach. The guideline applies percentages to various categories of the Estate receipts and payments and is expressed as follows:
- 2 ½ % of the total value of capital receipts of the Estate
- 2 ½ % of the total capital disbursements of the Estate
- 2 ½ % of the total revenue receipts of the Estate
- 2 ½ % of the total of revenue disbursements of the Estate
- Annual fee of 2/5 of 1% of the average annual market value of the capital of the Estate
Despite the guidelines, courts still require evidence to justify the quantum of compensation claimed by the Executor. This evidence can include time dockets or estimated time logs.
In a number of cases, courts have awarded an additional allowance to the Executor where the administration of the Estate was made more difficult than usual by reason of conflicting interests among the beneficiaries; where the Estate has involved the management and operation of a company; or where litigation was initiated by the Executor on behalf of the Estate. On the other hand, courts have reduced the Executor’s compensation from the guideline amount in cases where a large Estate which nonetheless was simple to administer was involved or where specific assets were being transferred.
I have had several other proposals for calculating this fee and I must say that the lost time from work in concert with problems with one sibling particular sibling leave me in a position where I would be happy to just let the lawyers deal with it. The real conundrum is arriving at what is fair.
That is an interesting one, Fred! I’m in the process of preparing my will and find it enlightening to read your posts. Thanks!