Executor Compensation in Ontario: Percentage Guidelines Explained

Many people have heard that executors in Ontario take a percentage of the estate, often described as a rule of thumb. You may be wondering whether it is a rule, how it is worked out and what can change the result.

This article explains what the statute says, why the percentage approach is not written into it, how the real statutory scales for other roles work, and what to confirm before relying on any number.

What the statute says

The Trustee Act says an estate trustee is entitled to a fair and reasonable allowance for the care, pains, trouble and time spent on the estate, as allowed by a judge of the Superior Court of Justice. On a passing of accounts, the judge may allow that allowance.

That is the legal test. The statute does not set a percentage for executors, so any percentage you hear about is a practical guideline drawn from court decisions, not a fee schedule in legislation.

Where percentage guidelines come from

You may hear about a percentage rule of thumb for executor pay. Because it comes from case law rather than a statute, the exact figures and how they are applied are worth confirming with a lawyer before you rely on them.

How a court weighs any guideline depends on the facts, so it is worth confirming with a lawyer. The question remains whether the amount is fair for the work actually done.

Statutory scales that do use percentages

Percentages are written into law for other roles, which is a common source of confusion. The table compares them.

The attorney scale in O. Reg. 26/95 applies to attorneys and guardians, not to executors. Do not apply it to an estate.

What can adjust the amount

• The will: if it fixes the allowance, section 61 does not apply.
• Professional services: where a lawyer is the trustee and provides necessary professional services, the allowance may be increased.
• The work involved: the care, pains, trouble and time spent on the estate.
• Agreement or approval: early payment needs consent of the interested adults, court approval, or a will that allows it.

If the court later approves less than a trustee took early, the difference can be ordered repaid. When compensation is claimed on a value-based management fee, the accounts must show how the value was set.

Compensation is separate from expenses. A trustee who believes an expense is properly incurred in carrying out the trust may pay it from trust property, or pay it personally and recover the same amount from trust property. The Superior Court of Justice may later disallow a payment or reimbursement if the expense was not properly incurred. Executor's fees are also taxable, and CRA treats them as business income if the person acts in that role in the course of a business, and otherwise as income from employment or office.

How compensation is reviewed when accounts are passed

Ontario has no statutory requirement for estate trustees to pass accounts at fixed intervals, and they may choose not to unless the court compels them to. Apart from an inventory, an executor or administrator need not account to a court unless asked by or on behalf of a person interested in the property or a creditor of the deceased.

A person who appears to have a financial interest in an estate may move for an order requiring the estate trustee to pass accounts. When a court passes accounts, the judgment orders fair and reasonable compensation paid to the estate trustee out of the estate.

Accounts filed with the court must include, among other things:

• An account of all money received and all money disbursed, including the trustee's compensation.
• All money and investments at the closing date, and all liabilities, contingent or otherwise.
• A statement of the compensation claimed.

The notice of application and a draft judgment must be served on every person with a contingent or vested interest in the estate at least 60 days before the hearing date if served in Ontario. If they are served outside Ontario, the minimum is 75 days. A beneficiary who objects must serve and file a notice of objection to accounts (Form 74.45) at least 35 days before the hearing date.

What to do next

• Read the will for any clause on compensation.
• Keep accurate records of the estate's assets and transactions. A note of the time you spend may also help you explain your compensation later.
• Keep receipts for any expense you pay, so it can be explained later.
• Treat any percentage figure as a rough check and confirm current guidance with a lawyer.
• Talk to the other interested people before taking any payment.
• Ask an accountant about tax on the fees.

Frequently asked questions