- Whether a percentage figure you have heard applies to a particular estate depends on the facts, so it is worth confirming with a lawyer.
- Executor compensation is not deducted from the estate value when Estate Administration Tax is calculated.
- Fees an executor receives are generally taxed as office income, with CPP and income tax deducted and a T4A issued.
- How executor pay applies to your estate depends on the facts, so it is worth confirming with a lawyer before anyone pays themselves or objects.
If you have been named as an executor, or you are a beneficiary watching one, you have probably heard a simple-sounding figure: executors "take a percentage" of the estate. It is a common piece of family wisdom, and how it applies to a real estate is worth checking.
This article explains how to think about that idea in Ontario. It covers what an executor does, how pay fits into the estate's costs, what the tax consequences are, and what happens when the people involved do not agree. The exact amount in any estate depends on the facts, and a lawyer can confirm how the current approach applies to you.
Where the percentage idea comes from, and why to be careful with it
Executor pay is often talked about in terms of percentages. How any such figure applies to a particular estate depends on the facts, so it is worth confirming with a lawyer.
Treat any number you hear as a starting point for a conversation, not as an entitlement. Whether a particular amount is fair depends on your situation, so it is worth confirming with a lawyer. If the figure matters to you, ask a lawyer to confirm how it is applied to your estate before anyone pays themselves.
What an executor actually does
Pay is easier to think about once you see the job. Ontario's guidance says an executor winds up the deceased's affairs: paying taxes, bills and debts, collecting the assets and distributing what is left. Early duties include filing the deceased's tax return, telling banks and financial institutions about the death, and contacting the Family Responsibility Office if support was being paid.
A person named as executor is not required to act. That matters for fairness: someone who accepts the role takes on real responsibility, including possible personal liability if assets are handed out before a clearance certificate is received from the CRA.
- Collecting and protecting the assets
- Filing the deceased's tax return
- Paying debts and taxes before distributing
- Applying for a certificate where one is needed
- Giving notice to beneficiaries when applying
Compensation versus expenses
Executor compensation is different from estate expenses. Ontario's guidance says that costs of estate professionals, such as tax filing, legal work and property maintenance, are paid from the estate as expenses. Those are payments to other people for services. Compensation is what the executor receives for their own time and responsibility.
Keep the two separate in your records. Beneficiaries are far more comfortable when they can see which payments went to outside professionals and which, if any, went to the executor.
| Item | Who is paid | How it is generally treated |
|---|---|---|
| Lawyer, accountant, property upkeep | Outside professionals or service providers | Paid from the estate as expenses |
| Executor compensation | The executor | Treated as office income for tax; CPP and income tax deducted, T4A issued |
| Estate Administration Tax | The province | Paid by the estate, not the executor personally |
Tax effects of executor pay
Executor compensation does not reduce the value used to calculate Estate Administration Tax. Funeral expenses, lawyer's fees, loans, credit card debt and commissions cannot be deducted, and executor compensation is therefore not deducted either. For a certificate applied for on or after January 1, 2020, there is no tax on the first $50,000 and then $15 per $1,000 above that.
For the executor, 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, with GST/HST left out of the box 48 amount. Whether GST/HST applies to a particular executor's fees is something to confirm with an accountant.
If people disagree about the amount, and what to do next
Disagreements about pay usually come from poor communication. Beneficiaries who feel shut out assume the worst. Where the disagreement cannot be resolved, there are court tools. 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. If the court grants that order, the estate trustee must bring an application to pass accounts. In some estate and trust lawsuits in Toronto, Ottawa and Windsor (Essex), mandatory mediation applies unless the court grants an exemption.
- Read the will for any wording about compensation
- Keep a dated log of tasks and time from day one
- Keep executor payments separate from professional expenses
- Talk to the beneficiaries before taking any amount
- Ask an accountant how the payment will be reported
- Ask a lawyer before paying yourself if anyone objects or if minors or incapable beneficiaries are involved
Frequently asked questions
Is there a fixed percentage executors must follow in Ontario?
Do not assume that a percentage you have heard applies automatically to your estate. The amount depends on the facts of the estate, so any rule of thumb is a starting point only. A lawyer can confirm how the current approach applies to your situation.
Does executor pay reduce the Estate Administration Tax?
No. Executor compensation is not deducted from the estate value used for the tax. Only encumbrances on real property, such as a mortgage, are deductible.
Is executor compensation taxable?
Generally yes. The CRA treats fees not earned in the regular course of business as office income, with CPP and income tax deducted and a T4A issued.
Can I be forced to be an executor?
No. A named executor is not required to act. If you are unsure, get advice before you start doing things for the estate.
Sources
- Ontario.ca – Estate Administration Tax — ontario.ca
- Ontario.ca – Apply for probate of an estate — ontario.ca
- Ontario.ca – Administering estates — ontario.ca
- Ontario.ca – What to do when someone dies — ontario.ca
- Ontario.ca – Office of the Children's Lawyer and estates and trusts matters — ontario.ca
- Ontario.ca – Mandatory mediation for civil cases — ontario.ca
- CRA – Payments of fees for services — canada.ca
- CRA – Apply for a clearance certificate — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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