Executor Compensation

 In Ontario the compensation of an executor is determined by the Trustee Act. This legislation outlines in Section 61(1) that a trustee is entitled to a such fair and reasonable allowance for the care, pains, trouble and time expended in administering the estate.

Although there is a practice of awarding estate trustee compensation based on a percentage of:

• Capital Receipts (money received from selling property)

• Capital Disbursements (money spent on fixing estate assets),

• Revenue Receipts (money received from selling goods or services), and

• Revenue Disbursements (money spent on things like salaries and supplies)

• along with an annual management fee of 0.4% on the total value of the estate assets.

  This is often referred to as 2.5% on receipts, and 2.5% on distribution, although mathematically it can be more in complex estates involving many years of administration.

This practice is not automatic and decisions on executor compensation are made on a case-by-case basis, although the general guideline of 5% of the total value of the estate is often referred to.

This 5% value is referred to as the "tariff" and which must be reviewed confirm “gainst the "five factors" approach set out in Toronto General Trusts Corp. v. Central Ontario Railway. Time spent on the administration of the estate should not be the dominant factor in fixing compensation, nor should compensation be reduced to "punish" a trustee who has not kept adequate records. Reducing the assessment required by s. 61(1) of the Trustee Act to the mere product of hours spent multiplied by a reasonable hourly rate is inconsistent with the statutory command that the compensation be "fair and reasonable" and that, in addition to time spent, it reflect "the care, pains and trouble" expended in the administration of the estate,” Laing Estate v. Hines, 1998 CanLII 6867 (ON CA), which found that in that the amount fixed under the tariff guidelines provided fair and reasonable compensation for the executor.

However, it is important to note that this is 5% tariff guideline amount is not a guaranteed amount. The compensation that an executor actually receives may be less than 5% and is typically negotiated between the executor and the beneficiaries of the estate. The compensation must be reasonable and must take into account the complexity of the estate, the time and effort required to administer the estate, and any special skills or expertise required by the executor (Toronto General Trusts Corp. v. Central Ontario Railway.).

It is also worth noting that in some cases, an executor may waive their right to compensation. This may occur if the executor is a family member or close friend who is administering the estate as a favor to the deceased, or if the executor is also a beneficiary of the estate.

In any case, the compensation of an executor should be discussed and agreed upon in advance to avoid any misunderstandings or disputes later on.

It is always a good idea to seek our professional advice from to ensure that the compensation is reasonable and in line with the law in Ontario.