Executor Fees in Ontario: Who Decides the Amount and Tax

Being an executor, or estate trustee, can mean a lot of work. Many people wonder whether they can be paid, how much is appropriate, and who gets the final say. Beneficiaries ask the same questions from the other side, because every dollar of compensation comes out of the estate.

This article explains the Ontario test for executor compensation, the situations where different rules apply, how a beneficiary can challenge a claim, and how the fees are treated for tax. It is general information, not advice on your own estate.

The legal test: a fair and reasonable allowance

Under section 61(1) of the Trustee Act, an estate trustee is entitled to a fair and reasonable allowance for their care, pains and trouble and the time they spent, as allowed by a judge of the Superior Court of Justice. The statute does not set a percentage or a formula.

That means there is no fixed rate you can point to as the law. What is fair and reasonable depends on the facts of the particular estate and the work actually done.

Compensation does not always have to go to court. The Trustee Act says the amount can be settled even when the estate is not before the court in an action. In practice, that leaves room for the trustee and the beneficiaries to agree on an amount.

When different rules apply

• A will that fixes the allowance: section 61 of the Trustee Act does not apply where the will or other trust instrument itself fixes the allowance.
• A lawyer as estate trustee: where a barrister or solicitor is the trustee and has provided necessary professional services to the estate, the allowance may be increased.

If you are named in a will that mentions compensation, read that wording carefully. Whether a clause actually fixes the allowance can be a question worth confirming with a lawyer.

How a beneficiary can challenge the compensation

A trustee must keep accurate records of the estate's assets and transactions. Accounts filed with the court must include the assets at the date of death, all money received, all liabilities, and a statement of the compensation the estate trustee claims.

A beneficiary is an interested person who can compel accounts. A person with a financial interest may also move for an order requiring the estate trustee to pass accounts. When a beneficiary objects, a judge passing the accounts may allow a fair and reasonable allowance.

The objection can cover the accounts generally, including the compensation claimed. The estate trustee files the accounts verified by affidavit (Form 74.43), along with a copy of the certificate of appointment and any earlier judgment on passing of accounts.

How executor fees are taxed

Executor fees are income to the person who receives them, and how they are reported depends on who the executor is.

If the estate pays executor, liquidator or trustee fees, it must file a T4 Summary and the related T4 slips. Which category you fall into can turn on the facts, so an accountant can confirm how your fees should be reported.

What to do next

• Check whether the will fixes the compensation or says nothing about it.
• Keep clear records of your time, the work done and every transaction in the estate.
• Talk to the beneficiaries early, since compensation can be settled without a court action.
• If you are a beneficiary and disagree with a claim, note the hearing date so you can serve any objection at least 35 days before it.
• Ask an accountant how the fees should be reported, and a lawyer if the amount is disputed.

Frequently asked questions