Estate Trustee Compensation

An estate trustee is entitled to fair and reasonable compensation for performing his or her duties. The compensation or fees due to an estate trustee is usually calculated on the basis of receipts which come into the trustee’s hands and then disbursed to creditors and beneficiaries. Usually the fee is not increased if there is more than one estate trustee and they must decide amongst themselves how it should be shared.

An estate trustee’s fee is subject to beneficiary or court approval.  It must not be taken in advance of obtaining approval or risk being returned with interest.  It is usually calculated by a formula and then compared to the test of what is “fair and reasonable.

In addition, if an estate trustee uses his or her own money in administering the estate, he or she is usually (subject to beneficiary or court approval) entitled to be reimbursed for these amounts out of the estate. An estate trustee who reimburses him or herself for out-of-pocket expenses should ensure that back-up documentation exists.

One of the prime responsibilities of the estate trustee is to keep accounts and it is necessary to keep accurate, complete and detailed records of all transactions and your dealings with the estate. You should also keep a record of the time you spend in administering the estate as the time docket may be helpful in the event there is an objection to your compensation.

As your solicitor, our function is to obtain the Certificate of Appointment, advise you as to the interpretation and meaning of the Will, the entitlement of beneficiaries, and your duties as trustees, assist you in the preparation of accounts and in preparing and obtaining releases.

The responsibility of the administration of an estate is divided between the solicitors and the estate trustee, although at times the responsibilities appear to overlap. If a solicitor is paid to do the work of an estate trustee, then that part of the solicitor’s fees may reduce the compensation to which the estate trustee is entitled. In other words, if we do work on your behalf, our fees may have to be paid out of your compensation and not from the estate.  Finally, the compensation paid to an estate trustee is taxable income and must be reported on your personal tax return, and depending on the identity and circumstances of the estate trustee, there may also be Harmonized Sales Tax (HST) on the compensation.

Determining Compensation

If compensation is not fixed by the Will, then in Ontario, the courts have held that determining what is ‘fair and reasonable’ is a two-step process. The foregoing tariff is just a guide and the court has the ultimate discretion to award a higher fee or reduce the fees if circumstances warrant.

Step 1

Calculate 2.5% of the receipts and 2.5% of the disbursements. If estate or trust assets are invested or managed for a significant period of time calculate a management fee; usually 2/5ths of the 1% per annum of the average market value of the portfolio. If the trustees simply delayed or took a long time to settle due to inactivity or unknown reason, this fee is generally not applicable. 

Step 2

The mathematical result is then compared to the ‘five-factors’:

  • The size of the estate
  • The care and responsibility involved
  • The time spent
  • The skill and abilities shown
  • The result obtained or degree of success in the administration.

The Court of Appeal has suggested the mathematical result is not to be considered the ‘floor’ but rather the ‘ceiling’ when determining the appropriate amount.

Corporate trustees (i.e. trust companies) have their own compensation agreements that typically result in greater total compensation, and this is usually agreed to by the testator at the time of making the Will.

The appropriate amount of compensation will vary from estate to estate and each claim must be looked at on its own merits.

We can help.

 

Related Posts

I Just Bought a Condominium . . . Now What?

A condominium is a type of legal ownership where the property is divided between privately owned units and common elements. Each unit owner owns the unit as well as a proportion of common elements, which includes such things as hallways, lobbies and elevators and there are also “exclusive use common property elements,” such as balconies,

Read More »

Challenges to Testamentary Documents

Quite often we hear about someone’s Will being challenged.  The most common grounds being: proper execution; knowledge and approval of the contents of the Will; fraud; lack of testamentary capacity; and undue influence and suspicious circumstances. A person who wishes to challenge a Will as being invalid must file a Notice of Objection with the

Read More »

Resolving Challenges to Testamentary Documents and other estate disputes

Sometimes estate disputes are inevitable given the family dynamics for the challenge to be made. A variety of mechanisms exist to resolve disputes arising over testamentary documents, such as informal settlement, mediation, and court. Informal Settlement   At any time, the matter can be resolved informally. Legal counsel may discuss the case and advise the parties

Read More »

Duties and Powers of an Attorney for Property

The role, powers and obligations of an attorney for property are set out by statute (Substitute Decisions Act, 1992) as interpreted by the courts (called common law). Purpose If a person is unable to look after or may need help with his or her own affairs such as banking, paying bills, buying necessary items, or

Read More »

Taking Advantage of the TFSA

The Tax Free Savings Account (TFSA) encourages Canadians to save money to meet financial goals and lifetime saving needs. No tax deduction is available for the contributions made, but all money withdrawn is tax-free and all investment income (e.g., interest, dividends, capital gains) can be generated without attracting tax or affecting the eligibility for federal

Read More »

Implications of appointing a non-resident Estate Trustee

Appointing an estate trustee who does not reside in Canada has several negative implications.  A non-resident estate trustee is required to post a bond (which is costly and adds delay), and he or she may not be eligible to make certain financial investments available to Canadian residents (e.g., stocks, bonds, Canada Savings Bonds). Even if

Read More »
Scroll to Top