The Executors Pains & Troubles Ought to be Recognized

You’ve been appointed as Executor, now known as an Estate Trustee. You accept the appointment. Now you wish you hadn’t. The beneficiaries complain that you’re not moving fast enough. You could have sold the home for more money. Why didn’t you roll over the RRSPs? It’s no wonder that section 61 of the Trustee Act, R.S.O. 1990, c -T-23, dictates that an Estate Trustee is entitled to a “reasonable allowance for his … pain and trouble.”

But what’s reasonable?

Justices Adams and Corbett of the Divisional Court clarified the problem in Logan v. Laing Estate. There, the Court decided that the usual percentages will be presumed to be fair and reasonable. The usual percentages are approximately 5% of the value of the Estate (2 -1/2 % of capital receipts, 2 -1/2 % of capital disbursements, 2 -1/2 % of income receipts, 2 -1/2 % of income disbursements and 2/5 of 1 % as a yearly care and management fee). The Court of Appeal affirmed this decision.

The benefit of using the percentage method to calculate what’s reasonable for the Estate Trustee compensation is predictability. Our review of past case law suggests that what’s reasonable was before this case anything but predictable. Courts often adopted a quantum meruit approach. In other words, an Estate Trustee was paid as much as he deserved. Five factors were considered:

1. the size of the Estate
2. the care and responsibility required to administer the Estate
3. the time spent
4. the skill and ability displayed by the Estate Trustee
5. the success resulting from the administration.

This approach offered little predictability and often resulted in disparate awards of compensation. In some cases, Estate Trustee’s compensation proved to be worth approximately $60.00 per hour while in other cases it was worth $250.00 per hour.

Fortunately, the percentage approach alleviates some difficulties at least for the time being and provides for predictability in the compensation of Estate Trustees. The likelihood of expensive litigation about what’s fair compensation, will be reduced. In addition, the Court left room for exceptions to the general percentage rule. In exceptionally simple or complex cases, the rule doesn’t apply. Then you consider the five factors.

So if you are an Estate Trustee wondering what you are entitled to, here’s the starting point: Use the “percentages” approach to calculate your compensation. Then, unless someone, such as a beneficiary disagrees, take the compensation, but only after all interested parties approve of it and provide you with a Release. If someone refuses to approve your request for compensation, or if you feel uncomfortable, consider the percentage amount against the following “five factors”:

1. the size of the Estate
2. the care and responsibility required to administer the Estate
3. the time spent
4. the skill and ability you displayed as the Estate Trustee
5. the success resulting from the administration.

If you still feel uncomfortable, remember that it is only in rare cases (i.e. a very simple administration or a very complicated and time-consuming administration) that trial Courts in Ontario are to interfere with the “percentages” approach.