Last week, we explained why it is so important to choose an executor to manage your estate, and what types of qualities may make someone a good executor. This week, we will discuss executor’s compensation, and how they are determined.
Is an executor entitled to compensation?
Being an executor is time consuming and complicated, and as such, an executor is entitled to compensation for their work. In some cases, the deceased will set an amount in their will, earmarked as compensation for their executor. But even where the will does not mention executor’s compensation, an executor is entitled to a proportion of the estate value as payment in exchange for her time and services.
An executor’s fees are paid out of the residue of the estate, which is the remaining estate assets following payment of debts and bequests. Fees are considered taxable income.
How are an executor’s fees calculated?
As discussed, some individuals will earmark a portion of their estate as compensation for the executor, which makes matters relatively straightforward. In situations where no compensation has been set, an executor is usually entitled to, “fair and appropriate,” payment in exchange for discharging their duties and obligations.
Although not always an accurate basis for determining appropriate compensation, a percentage approach is often adopted. In Ontario, as a starting point, executor’s compensation may be roughly 2.5% of capital receipts and disbursement, and 2.5% of income receipts and disbursements. An additional amount may be added if an executor spent any significant time managing the estate.
Some of the other factors that are relevant in determining a fair and reasonable executor’s fee are:
- the size and complexity of the estate;
- the time spent managing the estate prior to distribution;
- the qualifications and skills of the executor; and,
- any especially positive outcomes achieved by the executor.
If an executor pays any fees for professional services that are necessary to the proper administration of the estate, these fees are considered estate expenses and do not come out of an executor’s fees.
Kitchener Waterloo lawyers specializing in estate administration
Executor’s compensation must be approved by estate beneficiaries, and if no agreement can be reached, they may ask the court to approve an appropriate amount. If you have been appointed as an executor, and have questions about claiming executor’s compensation or estate administration generally, you should speak to a knowledgeable estates lawyer that can advise you about your rights and obligations.
A member of our well-established Wills and Estates team can help you determine an appropriate amount of compensation, and if necessary, provide any other legal services that are required as part of estate administration. For clear, forthright legal advice call us at (519) 886-3340, or contact us online to book a consultation.