Anyone who has acted as an estate trustee will testify that administering an estate is quite an involved process and can take a great deal of time.
Fortunately, estate trustees are entitled to compensation for the work that they do to administer an estate.
But how much will you be paid?
What the law says
Ontario’s Trustee Act states that an estate trustee is entitled to “such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate”. However, there is no rule of thumb to work out how much is “reasonable”.
It is more straightforward if there is a Will that explicitly states how much compensation an estate trustee is entitled to, but this is not always the case. If the Will does not provide how much compensation the estate trustee is entitled to receive, then the beneficiaries will need to agree to the amount of compensation that is being requested from the estate trustee.
How is it calculated?
The compensation for estate trustees is usually based on the total of the following:
- 2.5% of the capital receipts (value of the estate and assets), plus
- 2.5% of the disbursements (payments out of the estate), plus
- Two-fifths of 1% of the average annual value of the assets, as a care and management fee.
However, not all estates are created equal. There are five factors that courts consider when evaluating reasonable compensation for an estate trustee:
- The size of the estate;
- The care and responsibility involved;
- The time required;
- The skill and ability demonstrated by the trustee;
- How successful the trustee was.
For example, an estate with multiple assets of high value, together with a large number of beneficiaries in many different locations, will mean a great deal of work for the estate trustee, compared to a smaller estate with only a few beneficiaries.
Paying for professional advice
Note that if an estate trustee retains any professionals, such as an accountant, the professional fees should be deducted from the estate trustee compensation.
Is the compensation taxable?
Yes, any compensation that an estate trustee accepts is treated as income and so is taxable. Some Wills may include a specific bequest for the estate trustee, which is not taxable.
While an estate trustee is definitely entitled to compensation, settling on an amount can be a complicated process. Bear in mind, that you also need to have the beneficiaries on side with you as well.
If you have any questions about what you should be paid as an estate trustee, contact our Wills and Estates Practice Group.