Are Executor Fees Charged on the Value of the House in Ontario?

For many families the house is the largest asset in the estate. If you are the executor, you may wonder whether you can claim compensation based on its value. If you are a beneficiary, you may be wondering whether a share of the house is about to be eaten up by fees.

This article explains how Ontario law frames executor compensation, where real estate fits into the estate, and why selling the house or transferring it to a beneficiary can raise different questions. It is general information, not advice on your situation.

What the law says about executor compensation

The starting point is the Trustee Act. A trustee, guardian or personal representative, which includes an executor, is entitled to a fair and reasonable allowance for care, pains and trouble and the time spent in and about the estate, as allowed by a judge of the Superior Court of Justice. The wording is about fairness and effort. It does not name a percentage of the house or of any other asset.

The amount can be settled even if the estate is not before the court in an action. When the accounts are passed, a judge may allow a fair and reasonable allowance for care, pains, trouble and time. Where compensation has not been fixed by the trust document or otherwise, the judge on a passing of accounts can fix it, and the trustee may then keep that amount out of money held.

The will comes first. The statutory allowance does not apply where the instrument creating the trust fixes the allowance, so a will that sets compensation, or says the executor acts without pay, governs. Read the will before you do any calculation.

Where the house fits in the estate

Real and personal property of a deceased person, other than property passing by survivorship, vests in the personal representative as trustee for the persons beneficially entitled, subject to payment of debts. The personal representative also has power to dispose of and deal with the real property. In plain terms, if the house was in the deceased's name alone, the executor is responsible for it until it is sold or passed on.

That responsibility is real work: securing the property, keeping it insured, dealing with utilities and taxes, and deciding what happens next. Those tasks are the kind of care and trouble a judge can consider. The statute does not say that the house's market value alone sets the pay.

• Real property not disposed of within three years of death may vest in the persons beneficially entitled.
• The power to sell can be used to distribute the estate as well as to pay debts.
• If the deceased owned real property, the estate normally has to be probated.

Selling the house versus transferring it to a beneficiary

A sale turns the house into money that passes through the estate. A transfer in kind moves the house itself to a beneficiary. Executors and beneficiaries often ask whether the house should be counted the same way in both cases. The statute does not answer that by formula, so the question is usually one of what is fair and reasonable for the work done. How a judge would view a particular sale or transfer depends on the facts, and a lawyer can tell you how courts have approached it.

Land transfers need paperwork. A transfer by an estate trustee needs a solicitor's statements that the transferor is entitled under the will and estate legislation, along with transmission evidence, usually a certificate of appointment. A buyer's lawyer may ask for a certificate in practice, so confirm current requirements before you list or transfer.

Do not confuse compensation with estate administration tax

Many people see the house in two places: once when thinking about executor pay, and once when thinking about probate cost. They are different. Estate administration tax is a charge paid when the application for the certificate is filed. For certificates applied for on or after January 1, 2020, there is no tax on an estate of $50,000 or less, and above that the tax is $15 for each $1,000 or part of value over $50,000. The value is as of the date of death.

For that tax, Ontario real estate counts less encumbrances, while out-of-province real estate is excluded. Funeral costs, legal fees, loans and credit card debts cannot be deducted. None of that tells you what the executor is paid. The two numbers answer different questions.

What to do next

• Read the will for any clause that sets compensation or says the executor acts without pay.
• Keep a dated record of every task done on the house, with receipts and the time each took.
• Get the house value at the date of death in writing, because the tax uses that date.
• Confirm with a lawyer what land registration will require before you sell or transfer.
• If beneficiaries disagree, talk early about passing the accounts so a judge can settle compensation.

If the numbers are large or the family is not in agreement, a lawyer can explain how compensation is usually justified on an estate like yours before anyone takes money out.

Frequently asked questions