Estate Plan Management
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Disclaimer: This article on executor fees in Ontario and your estate plan is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
We have previously discussed that being an executor, or estate trustee, is a weighty responsibility. To carry out the terms of the will requires substantial time and energy. These responsibilities include collecting and distributing the estate assets (including large items like any real estate) and paying any debts.
To carry out these duties, the executor must keep accurate records of the estate accounts and all transactions related to the estate. They must also act in the best interests of the estate and the beneficiaries of the estate. Depending on the value of the estate, this can be an onerous responsibility.
It is not surprising, then, that executors often may be entitled to compensation. However, the question becomes, how much can an executor be paid for their role?
In this article, we will outline how to calculate executor fees in Ontario. We will also look at how that applies to multiple executors and others who perform the tasks of an executor.
If you are an executor, you do not need to handle this heavy responsibility alone. You should seek guidance from a lawyer to ensure you carry out your duties correctly and in the estate’s best interests.
How much is executor compensation in Ontario?
Executor fees for administering an estate are provided for in the Trustee Act. It says:
61 (1) 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. R.S.O. 1990, c. T.23, s. 61 (1); 2000, c. 26, Sched. A, s. 15 (2).
However, section 61 (5) states, “Nothing in this section applies where the allowance is fixed by the instrument creating the trust.”
What does this mean? The first step is to ask, “Does the will set a flat fee for executor compensation? Is there a clause explicitly stating an amount or percentage of the estate that will be paid to the executor?” If so, that is usually the amount that the estate executor will receive.
Generally speaking, we do not recommend including a clause in the will that will set executor compensation at a specific fee. This is because it can be challenging to determine the size and complexity of the estate beforehand. An amount may have seemed reasonable when drafting the will, but it may not be appropriate when actually administering the estate.
What if there is no provision for payment in the will?
What if there is no amount of compensation stipulated in the will? The Ontario courts have determined five factors in determining what is “fair and reasonable” compensation. These are:
- The size of the estate;
- The care and responsibility involved;
- The time spent by the executor performing the duties;
- The skill and ability demonstrated and required by the executor; and
- The success resulted from the estate administration.
In Ontario, the executor of an estate is generally paid a percentage fee – meaning it would depend on the estate value. Executors generally receive roughly 5% of an average estate. The Court has applied guidelines where an allowance is usually set at 2.5 percent for capital and revenue receipts and 2.5 percent for capital and revenue disbursements.
However, it is vital to remember that this is just a guideline. The court will ultimately decide what is fair and reasonable based on the circumstances of the particular estate. A simple estate may warrant a lower fee than a more complex estate and vice versa.
One fee for one role, no matter how many executors
In some instances, a will appoints multiple people as executors. The amounts listed above apply to anyone who is an executor. For example, let’s say that there are two executors and that 2.5% of the capital receipts is $10,000. The estate would pay $10,000 for both executors ($5,000 each), not $10,000 each.
This also applies to anyone who is not an executor but performs tasks that are part of the executor’s duties. If the executor hires someone to help with the estate, the executor will pay that person from their compensation.
Let’s use estate lawyers as an example. Estate lawyers are careful to carefully document their time. Are they performing work the executor usually does, such as notifying and reporting to beneficiaries? If so, they charge for their time as the executor.
If the lawyer were to charge the estate for those tasks, the estate would (in effect) be paying twice for the same performance. So those costs would be subtracted from the executor’s compensation.
However, on the other hand, a prudent executor is expected to seek out professional advice to ensure that the estate is being administered properly. In that instance, the lawyer would charge their time to the estate, and not deduct it from the executor’s compensation.
Navigating Estate Planning and Executor Fees in Ontario
The role of executor comes with many responsibilities. It can be a daunting task, made even more complicated by the fact that executors are not always familiar with their duties.
That is where we come in. At Beeksma Law, we have a team of experienced estate lawyers who can help you navigate the executor process from start to finish. We can help you understand your responsibilities and provide guidance on how to best manage the duties of an executor.
Our breadth of experience, from preparing estate plans to handling estate litigation, gives us the knowledge and skills to help you through every step. To learn more, please book a call with us today. We would be more than happy to discuss your specific needs.