- An estate trustee is entitled to a fair and reasonable allowance for their care, pains, trouble and time, as allowed by a judge of the Superior Court of Justice.
- Reimbursement of proper expenses is separate from compensation.
- How the payment is taxed depends on your situation, so confirm it with an accountant before you take it.
If you are an executor who expects to be paid, two questions come up quickly: how much is fair, and what does it do to your own tax. This article deals mainly with the first, and with how compensation differs from an expense refund or an inheritance.
Ontario's estate law does not hand you a tax answer in the Trustee Act. How compensation is reported and taxed depends on your circumstances, so an accountant should confirm it for you.
The right to compensation
An estate trustee is entitled to a fair and reasonable allowance for their care, pains, trouble and time spent on the estate, as allowed by a judge of the Superior Court of Justice. Compensation can be settled even when the estate is not before the court in an action, and a judge passing the accounts may allow a fair and reasonable allowance.
If the executor is a lawyer who has provided necessary professional services to the estate, the allowance is increased by an amount considered fair and reasonable for those services.
Compensation, expenses and inheritance compared
| Payment | What it is |
|---|---|
| Compensation | An allowance for the trustee's care, pains, trouble and time. |
| Expense reimbursement | Money back for proper costs of carrying out the trust, paid from the trust property or recovered after the trustee pays personally. |
| Inheritance | A share a beneficiary receives under the will, which is a different thing from payment for the work of administering. |
Whether you can receive both an inheritance and compensation when you are executor and beneficiary depends on your situation, so it is worth confirming with a lawyer. Keep them separate in your records, since they are different kinds of payment.
Is it taxable income?
This is the point where you should speak to an accountant. Whether compensation counts as employment income, business income or something else, and how it differs in tax terms from an inheritance, depends on the facts and on federal tax rules that are beyond the scope of this article.
What you can say is that tax matters are part of the executor's job in any case. Before distributing property, the legal representative of a deceased taxpayer must obtain a clearance certificate from the Minister confirming that tax amounts have been paid or secured. An executor who distributes without one is personally liable for the unpaid tax, up to the value of the property distributed.
Documenting and defending your fee
Estate trustees must keep accurate records of the estate's assets and transactions. On a passing of accounts, beneficiaries are notified, and judgment can be unopposed only if no notice of objection to the accounts or the compensation claimed has been received. A beneficiary who disagrees with your fee can therefore object.
- Keep a log of the time and tasks you spent on the estate.
- Keep expense receipts separate from your time records.
- Talk with the beneficiaries early about what you plan to claim.
What to do next
- Decide whether you plan to claim compensation and keep a time log from the start.
- Ask an accountant how the payment will be treated on your own tax return.
- Ask a lawyer how to present the claim to the beneficiaries or the court.
- Do not distribute estate property until the clearance certificate is in hand.
Frequently asked questions
Is an executor entitled to be paid in Ontario?
An estate trustee is entitled to a fair and reasonable allowance for their care, pains, trouble and time, as allowed by a judge of the Superior Court of Justice. Compensation can also be settled without the estate being before the court in an action.
Is executor compensation the same as an inheritance?
No. Compensation is an allowance for the work of administering the estate, while an inheritance is a gift under the will. They are different kinds of payment, and an accountant can explain any difference in tax treatment.
Can I be repaid for estate expenses I paid myself?
A trustee who believes an expense is properly incurred in carrying out the trust may pay it personally and then recover it from the trust property. Keep the receipts.
Can beneficiaries challenge my fee?
Yes. On a passing of accounts, they can file a notice of objection to the accounts or to the compensation claimed.
Sources
- Trustee Act, R.S.O. 1990, c. T.23 (e-Laws) — Ontario e-Laws
- R.R.O. 1990, Reg. 194: Rules of Civil Procedure (e-Laws) — Ontario e-Laws
- Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 159 — Justice Laws (federal)
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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