Saturday, January 21, 2006

Executor and Trustee Fees

You may appoint an executor in your Will to wind up your affairs and distribute your estate on death. Your executor (or administrator if you die without a will, or your executors are unable or unwilling to act)is entitled to be reimbursed for reasonable expenses which he or she incurs in dealing with your estate. Under British Columbia law, he or she may also charge fees for his or her time, effort and skill.

You may decide how much your executor may be paid in your Will. You may state in the Will that your executor may receive a fixed sum or a percentage of your estate for acting as the executor. Or you can sign a contract with your executor setting out the executor fees.

In British Columbia, if you do not set out how much the executor may charge in your Will or in a contract with the executor, then pursuant to s. 88 of the Trustee Act, RSBC 1996, c. 464, the executor may charge a reasonable amount up to a maximum of five percent of the gross capital and income of your estate. If your executor has to administer a trust under your will, he or she may also claim an annual care and management fee based on the value of the assets he or she is administering. The care and management fee may not exceed 0.4 percent of the average value of the assets each year. These rules do not apply if you have set out the fees in your will or in a contract.

The British Columbia Law Institute has recommended that the statutory ceilings on executor and trustee remuneration of five percent and on the care and management fee of 0.4 percent be repealed. The “Report on Statutory Remuneration of Trustees and Trustee Accounts” is here.

Where the executor’s fees are not set out in a Will or contract, the executor can propose a fee to the beneficiaries, and seek their approval. If the executor cannot agree on a fee with all of the beneficiaries, or if some of the beneficiaries are minors or do not have legal capacity to contract, then the fees must be approved by the court.

How does one determine how much fees are reasonable? There are no hard and fast rules. The factors that the courts will consider include:

a. the value of the estate;
b. the amount of time the executor expended in administering the estate;
c. the complexity of the estate;
d. the skill with which the executor has acted;
e. the results achieved by the executor.

Executor’s fees are taxable income to the executor. Because executor’s fees reduce the value of the amount of money available to distribute to beneficiaries, where the executor is also a major beneficiary of the estate, it is not always in the executor’s best interest to take fees.


Anonymous said...

Could you elaborate on your last paragraph regarding it not being in the executor's best interest to take fees if they are a major beneficiary?


Anonymous said...

I guess, because the fees received are taxable, and the money distributed to the beneficiaries is not... I'm thinking.