Can an Ontario Executor Pay Themselves Before the Estate Is Settled?

Administering an estate can take months or years, and the work is real. It is natural to wonder whether you can take your compensation as you go, rather than waiting until everything is distributed.

The short answer is that the law focuses on whether the amount is fair and reasonable, and beneficiaries have ways to challenge it. This article explains how compensation is set, how it differs from getting expenses back, and what approval is wise before you pay yourself.

How executor compensation works

Under the Trustee Act, an estate trustee is entitled to a fair and reasonable allowance for their care, pains and trouble and time spent, as allowed by a judge of the Superior Court of Justice. The statute sets no percentage or formula. The only statutory test is whether the amount is fair and reasonable.

The amount can be settled even when the estate is not before the court in an action. That said, a judge passing the accounts may allow a fair and reasonable allowance if someone objects.

• If the will or other trust instrument fixes the allowance, the Trustee Act allowance rules do not apply.
• If the executor is a lawyer who has provided necessary professional services to the estate, the allowance may be increased.

Compensation is not the same as expenses

Getting reimbursed for costs is different from paying yourself for your time. An estate trustee who believes an expense is properly incurred in carrying out the trust may pay it from estate property, or pay it personally and recover it from the estate. Examples include a funeral paid personally, or insurance and utilities on a vacant house. The court may later disallow the payment or recovery.

Keep these two categories separate in your records. Receipts support reimbursements. Compensation needs its own explanation of the work done.

Why timing and approval matter

A beneficiary who objects to the accounts, including the compensation claimed, must serve a Notice of Objection to Accounts (Form 74.45) at least 35 days before the hearing date. A judge passing the accounts may allow a fair and reasonable allowance. So any amount you have already taken can be reviewed later.

A beneficiary with a financial interest can also move for an order requiring the estate trustee to pass accounts. Accounts filed with the court must include a statement of the compensation the estate trustee claims. If a judge decides you took too much, you may have to account for it.

There is also the question of whether the estate is ready. Ontario's official guidance says the estate is distributed once assets have been liquidated and the funeral and burial expenses and any debts have been paid. Taking compensation before debts are known can leave the estate short.

Ways to reduce the risk

Taking money early is not automatically wrong, but it carries more risk the less the beneficiaries know. Common practical approaches include:

• Check what the will says about compensation first.
• Share a written summary of the work you have done and the amount you propose, and ask beneficiaries to agree in writing, since the amount can be settled outside an action.
• Where there is disagreement, or a beneficiary is a minor or cannot manage their affairs, consider passing accounts so a judge can allow the amount.
• Take smaller amounts on account rather than a large lump sum, and record each payment.

If the executor takes estate money that is not properly theirs, a judge on a passing of accounts may make a full inquiry and order the executor to pay such sum as is just.

What to do next

• Read the will for any clause fixing or addressing compensation.
• Keep a time log of tasks, dates and hours from the start.
• Keep expense receipts apart from compensation records.
• Tell the beneficiaries early what you expect to claim.
• Get written agreement from every beneficiary before taking any payment, if you can.
• Speak with an estates lawyer or accountant before paying yourself, especially if there is any tension or tax question.

Tax also matters. Executor fees paid to someone who does not act as an executor in the course of a business are income from an office or employment, reported in box 14 of a T4 slip. Fees earned by someone acting as an executor in the course of a business are business income reported on a T4A slip.

Frequently asked questions