Can an Executor Be Paid for Time Spent on a Small Estate?

Settling a modest estate can be a bigger job than people expect. There may be only a house and one bank account, but you still have to deal with the banks, the CRA, the beneficiaries and perhaps a court application. It is fair to ask whether you can be paid for that time.

This article walks through how compensation fits with the rest of an estate's costs, how a small estate is treated for probate, what the tax side looks like, and how to protect yourself. How much is appropriate in a particular estate depends on the facts, and a lawyer can confirm that for you.

What counts as a small estate in Ontario

For probate purposes, a small estate is one valued at $150,000 or less (as of April 1, 2021). It uses Form 74.1A and a draft certificate, Form 74.1C. Estates over $150,000 need a Certificate of Appointment of Estate Trustee.

Small does not mean simple. A bond may be required for a small estate certificate in some cases, such as when the applicant is not a resident of Ontario, Canada or a Commonwealth country, or when minor or incapable adult beneficiaries are involved. Whether a certificate is needed at all depends on the assets: Ontario treats probate as normally necessary when the deceased owned real property or assets held by a financial institution.

Why the work can be heavy even when the estate is modest

The tasks do not shrink with the estate. An executor winds up the deceased's affairs by paying taxes, bills and debts, collecting assets and distributing the rest. Early duties include filing the final tax return and notifying banks.

• Sending the application to beneficiaries before filing, with a signed copy
• Dealing with the Children's Lawyer or Public Guardian and Trustee where minors or incapable adults are involved
• Filing an Estate Information Return within 180 days after the certificate issues, even if the estate is $50,000 or less
• Filing T3 returns if income exceeds $500, or more than $100 goes to any one beneficiary
• Seeking a CRA clearance certificate before distributing, which can take up to 120 days

Applications for a certificate are typically processed within 15 business days but may take longer. Ontario also treats probate as typically needed where there is a dispute about the trustee or the will.

How compensation, expenses and tax fit together

There are three different money streams, and a small estate can only stretch so far. Professional costs such as tax filing, legal work and property maintenance are paid from the estate as expenses. The estate also pays Estate Administration Tax, which is nothing on the first $50,000 and $15 per $1,000 above that for certificates applied for on or after January 1, 2020. Executor compensation comes on top and cannot be deducted to reduce the tax base.

A very small estate may therefore have little left after unavoidable costs, which is one reason beneficiaries and executors should talk early about what is realistic.

Tax on what you receive

If you are paid, the CRA treats fees not earned in the regular course of business as office income. CPP and income tax are deducted, EI is not, and a T4A is issued. Taking nothing is also an option, and a named executor is not required to act in the first place. Whether taking or forgoing fees has tax consequences for you depends on your situation, so it is worth confirming with an accountant.

What to do next

If the work is heavy and the estate is small, protect yourself with a record. A written record of what you actually did is what lets you explain an amount if anyone asks. If the Children's Lawyer asks for estate accounts and the trustee does not respond, the Children's Lawyer may ask the court for an order requiring accounts, and if it is granted the estate trustee must bring an application to pass accounts.

• Keep a dated log of every task, call and trip
• Keep receipts and separate professional expenses from your own pay
• Tell the beneficiaries in writing what you plan to take and why, before taking it
• Confirm with an accountant how the payment will be taxed
• Do not distribute assets before getting CRA clearance
• Speak to a lawyer if anyone disputes the amount, or if minors or incapable beneficiaries are involved

Frequently asked questions