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Executor and Trustee Compensation

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This SlideShare presentation describes the entitlement, the calculation and the approval of compensation for an executor or a trustee.

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Executor and Trustee Compensation

  1. 1. Executor and Trustee Compensation
  2. 2. • Acting as an executor or a trustee is often a difficult and time-consuming task. • Executors and trustees are entitled to compensation for their efforts. In Ontario, the Trustee Act, R.S.O. 1990, c. T.23, states as follows (at section 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. • Although executors and trustees are entitled to be paid compensation, the process for calculating and obtaining approval of the amount of compensation can be complicated. Entitlement to Compensation
  3. 3. • The method for calculating executor and trustee compensation is not set out specifically in any statute in Ontario. However, a percentage tariff has been developed in the case law. • The fees usually charged for the administration of an estate or trust of average complexity are the total of the following figures: i. 2.5% of capital receipts; ii. 2.5% of capital disbursements; iii. 2.5% of annual revenue receipts; iv. 2.5% of annual revenue disbursements; and v. an annual “care and management fee” of 2/5 of 1% of the average fair market value of the assets during the period of administration of the estate or trust. Calculating a Compensation Claim
  4. 4. • The percentage tariff should serve only as a guideline. The amount of compensation can vary depending on the complexity of the estate, and is often judged against the following five factors, as set out in Toronto General Trust v Central Ontario Railway Co., (1905), 6 O.W.R. 350, to ensure that the amount awarded represents “fair and reasonable” compensation: i. the size of the trust; ii. the care and responsibility involved; iii. the time occupied in performing the duties; iv. the skill and ability shown by the executor or trustee; and v. the degree of success resulting from the administration. Calculating a Compensation Claim (con’t)
  5. 5. • Unless the Will or Trust document in question specifically permits the pre-taking of compensation, an executor or trustee is not permitted to take any compensation until either (i) all beneficiaries agree to such compensation, or (ii) the Court orders the payment of compensation. • Even if a Will or Trust document provides for the pre-taking of compensation, any compensation received by a trustee is subject to review on a passing of accounts. • If an executor or trustee has taken compensation without approval of the beneficiaries or a Court Order, he or she risks being ordered to repay the amount of compensation pre-taken, or having the amount of compensation reduced if it is not considered to be “fair and reasonable”. • Accordingly, even if an executor or trustee is authorized to pre-take compensation, he or she may wish to consider whether to do so, or to instead seek the protection provided by beneficiary or Court approval prior to receiving any compensation. When Compensation May be Taken
  6. 6. • The amount of compensation paid to an executor or trustee may be determined by agreement between the executor or trustee and the beneficiaries of the estate or trust, or by the Court on an audit of the executor or trustee’s accounts. • The formal process of approving an executor or trustee’s accounts and claim for compensation is called a “passing of accounts”. For more information on the process of a passing of accounts, please see our previous Slideshare Presentation, “Passing of Accounts” (https://www.slideshare.net/hullandhull/passing-of-accounts). • An executor or trustee may choose to pursue the informal route for approval of a compensation claim. This alternative option involves having all of the beneficiaries of the estate or trust approve the accounts and the compensation to be taken by the executor or trustee by signing a written Release. Approval of Compensation
  7. 7. Thank you for reading!

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