Executor Compensation

Executor compensation is covered under section 88 of the Trustee Act. Section 88(1) states that:

88 (1) A trustee under a deed, settlement or will, an executor or administrator, a guardian appointed by any court, a testamentary guardian, or any other trustee, however, the trust is created, is entitled to, and it is lawful for the Supreme Court, or a registrar of that court if so directed by the court, to allow him or her a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, including capital and income, of all the assets of the estate by way of remuneration for his or her care, pains and trouble and his or her time spent in and about the trusteeship, executorship, guardianship or administration of the estate and effects vested in him or her under any will or letters of administration, and in administering, disposing of and arranging and settling the same, and generally in arranging and settling the affairs of the estate as the court, or a registrar of the court if so directed by the court thinks proper.

The most common way that executor compensation is determined is for the executor to produce an accounting to all of the beneficiaries who share in the residue of the estate and include in the accounting the proposed executor fee. The accounting is rarely if ever given to any beneficiaries who get a specific bequest in the Will such as a fixed sum of money. If all of these residual beneficiaries approve the executor fee and release the executor from any liability upon receiving their respective shares of the estate, the executor compensation is determined by the accounting.

If the residual beneficiaries do not all consent to the executor compensation, a relatively simple application to the Supreme Court of British Columbia can be made to have the level of compensation set by a judge. When determining what is a "fair and reasonable allowance" for executor compensation, the court will look at the following factors:

the size of the estate;

the care and responsibility involved;

the time taken by the executor to administer the estate;

the skill and ability displayed by the executor; and

the success achieved on behalf of the estate when realizing estate assets.

The maximum of 5% set out in the above section is considered a maximum. After considering the above factors, a court could quite likely conclude that the full 5% should not be set as the executor compensation.

This article is for general information only, and should not be relied on as legal advice in any particular case. Consult a lawyer for advice on your case.

by Rod Mont