Is a Trustee Entitled to Be Paid in Alberta? Compensation Rules

Serving as a trustee takes time and carries real responsibility. If you are a trustee, you may wonder what you can charge. If you are a beneficiary, you may wonder whether the amounts are fair.

Alberta's Trustee Act (SA 2022, c T-8.1) addresses compensation directly. This article walks through the main rules and how the court can review them.

This article covers the law of Alberta.

The basic entitlement

A trustee is entitled to fair and reasonable compensation from trust property. Trustees are not presumed to be entitled to equal compensation, and the court may fix compensation on application using listed factors.

The trust document generally prevails over the Act unless the Act provides otherwise, so a will may set out pay for the trustee. Read it first. The Act applies to trusts created before, on or after its start, and it replaced the former Trustee Act on February 1, 2023.

Compensation sits alongside the trustee's other duties. A trustee must act in good faith and in accordance with the terms of the trust, the best interests of the objects of the trust, and the Act. A trustee must also use the care, diligence and skill that a person of ordinary prudence would use in dealing with another person's property. A trustee with specialized or professional skill is held to a higher standard that reflects that expertise. A trustee must also invest trust funds prudently with a view to obtaining a reasonable return while avoiding undue risk, and must review investments periodically. How these duties bear on whether a particular amount of pay is fair depends on the facts, so it is worth confirming with a lawyer.

Expenses versus compensation

Compensation is payment for the trustee's work. Expenses are different. A trustee may reimburse administration expenses from trust property without prior court authorization. Keep receipts for both kinds of amounts, because beneficiaries can ask to see them.

• Compensation: payment for time and effort, which must be fair and reasonable.
• Expenses: out-of-pocket administration costs, which may be reimbursed without prior court authorization.

Trustees sometimes hire help through an agent. When delegating to an agent, a trustee must personally select the agent, be satisfied of the agent's suitability, set the terms of the delegation, and reasonably and prudently supervise the agent. A trustee must not delegate the discretion to distribute trust property to beneficiaries. How a particular cost should be treated depends on the facts and the trust document, so it is worth confirming with a lawyer.

Taking pay along the way

A trustee may take interim compensation without court approval if at least one beneficiary of full capacity has a vested interest, but must first give written notice. The objection period is at least 2 months.

If the trustee took more than the court later allows, the trustee must restore the difference. A trustee who takes pay early is taking a risk that it may later be reduced.

The term qualified beneficiary comes up often in this area, because many reporting and notice duties run to qualified beneficiaries. A qualified beneficiary is one with a vested beneficial interest in the trust property, or one who has given written notice that they want to be one and has not withdrawn it. If you are not sure whether you are a qualified beneficiary, or whether the conditions for interim compensation are met, the answer depends on your situation and is worth confirming with a lawyer.

How the court reviews it

On application, the court may order that a trustee's accounts be passed, once or at set intervals. A beneficiary who is concerned can also seek information. Qualified beneficiaries must receive a report for each fiscal period within 2 months after it ends and may inspect source documents on written request. Some information can be withheld on listed grounds, and a qualified beneficiary can apply to court for disclosure.

Trustees are held to a standard of loyalty. A trustee must not use the office to gain a personal benefit beyond what the law or the trust document expressly permits. A trustee who is also a beneficiary should keep the two roles clearly separate. Pay that is not fair and reasonable can be challenged.

If a trustee has breached a duty, the court may order performance or remove the trustee. The court may also relieve a trustee from liability if they acted honestly and reasonably and ought fairly to be excused.

Where there is more than one trustee, a trustee is not liable for a co-trustee's breach unless the trustee participated in it through their own acts or omissions. Trustees may claim contribution and indemnity from one another. A trust document may also contain an exemption clause, which generally relieves a trustee of liability according to its terms, although the court may declare it ineffective where the trustee's conduct was so unreasonable, irresponsible or incompetent that the trustee ought not to be relieved. A trustee who is unsure how to proceed may apply to the court for directions, and following the directions discharges the duty unless they were obtained by fraud, wilful concealment or misrepresentation.

What to do next

• Trustees: read the trust document for any payment terms.
• Trustees: keep a record of time spent, tasks done and receipts for expenses.
• Trustees: give written notice before taking interim compensation and allow the objection period.
• Beneficiaries: ask in writing for the accounts and supporting documents.
• Either side: if the concern is that a trustee has failed to perform a duty, a trustee or beneficiary may apply to the court.
• Either side: consider asking a lawyer whether to seek a court order fixing compensation or passing accounts.

Frequently asked questions