One of the most frequently asked questions in Estate Planning is what an executor gets paid? Many people have either heard of an ‘executor’s fee’, and likely several have run into this idea when dealing with the estate of a deceased loved one.
In British Columbia, the remuneration of an executor is determined two different ways:
- The will of a deceased specifically outlines an executor’s compensation; or
- The will does not specifically outline the executor’s compensation, and it is instead dictated by s.88(1) of the Trustee Act of British Columbia (the “Act”).
Sometimes the testator of a Will specifically states that the executor is to be paid a specific sum of money, or a percentage of the value of the estate, as remuneration for their time and efforts in administering the estate. These days, it is more common for the testator to state in their Will that an executor is entitled to ‘fair and appropriate remuneration’ for the performance of their duties and obligations under the Will.
The Act allows for an executor to be paid ‘fair and reasonable allowance, not exceeding 5% of the gross aggregate value, including capital and income, of all of the assets of the estate. The Act also provides for an annual care and management fee of 0.4% of the average market value of the estate’s assets.
So, who determines what is ‘fair and appropriate’ or ‘fair and reasonable’ remuneration? In short, it is the court or registrar of the Supreme Court of British Columbia. An executor of an estate is required to ‘pass their accounts’ before the Court before an executor can be discharged from their duties as an executor. The formal passing of accounts before the Court can be a complex and lengthy process, generally requiring the services of a lawyer to prepare the formal accounts and appear on the executor’s behalf at a court hearing. It is during the passing of accounts that the executor details what they intend to receive as an ‘executor’s fee’ (their remuneration from the Estate). The Court will consider many factors in determining whether the proposed executor’s fee is ‘fair and reasonable’, including but not limited to:
- The size and complexity of the estate;
- The value of the assets of the estate;
- The amount of responsibility required of the executor in managing the assets of the estate (i.e., Did the executor have to look after a business of the deceased? Did the executor have to sell property of the deceased?);
- The time taken to administer the estate;
- The difficulties in administering the estate;
- The ultimate success of the executor in administering the estate.
Unless the estate is exceedingly large and complex, requiring extensive amounts of time and skill on the part of the executor, the Court is unlikely to permit the executor to be remunerated more than 3% of the gross aggregate value of the assets of the estate, as well as the management fee.
The time, cost and complexity of formally passing the executor’s accounts before the registrar is commonly avoided by the executor presenting ‘informal’ accounts to all of the beneficiaries of the estate. If the beneficiaries consent to the informal accounting, including the executor’s proposed remuneration, the executor can avoid having to make the application to Court to formally pass their accounts.
Unfortunately, in the case of minor or incapacitated beneficiaries, such beneficiaries are unable to provide consent to the executor’s informal accounts, and in order to be remunerated, the executor is required to provide notice to the Public Guardian and Trustee of British Columbia of their accounts, and pursuant to s.99 of the Act to formally pass their accounts before the court in order to obtain a discharge from their duties as executor.
In addition to their ‘executor’s fee’, an executor is entitled to be reimbursed for any reasonable expenses he or she may have properly incurred in the administration of the estate. If the executor retains the services of a professional, such as a lawyer or an accountant, they are permitted to be reimbursed the costs of such services so long as those services are ones that the executor was unable to reasonably have performed in their own capacity. If the Court finds that an executor incurred expenses unreasonably, the executor may be required to reimburse the estate.
For more information on estate planning refer to the following resources:
- Powers of Attorney and Representation Agreements
- Wills, Trust and Estate Planning
- Probate, Trust and Estate Planning
- Charitable Planning
- Wills Variation Claims
- Seniors and Financial Abuse
- Estate Litigation and Disputes
- Disability and Dependents Planning
Related video content – The Importance of Making a Will
This article is intended to be an overview of the law and is for informational purposes only. Readers are cautioned that this article does not constitute legal or professional advice and should not be relied on as such. Rather, readers should obtain specific legal advice in relation to the issues they are facing.