Estate Trustee Compensation: An Estate Lawyer’s Perspective on What is Fair?
A recent dispute involving Edward Rogers and Larry Tanenbaum has brought renewed attention to an issue that doesn’t usually make headlines, but comes up often in the practice of estates law, how much should an estate trustee be compensated for their time and effort?
The disagreement arises from the administration of the estate of Edward Rogers’ late mother, Loretta Rodgers, where trustees have reportedly claimed approximately $11 million in compensation. That claim is now being challenged, with concerns raised about whether the amount reflects the actual work performed. While the numbers in that case are extraordinary, the underlying question is one that arises in estates of all sizes and it can quickly become a source of tension between trustees and beneficiaries.
In Ontario, estate trustees are entitled to what the law calls “fair and reasonable compensation.” That sounds straightforward, but in reality, it leaves a lot of room for interpretation. Many people have heard of the so-called “5% rule,” others hearing that you get 2.5% of the assets coming into the estate and 2.5% of what goes out. While generally this is simplifying the rate prescribed under the Trustee act, the important thing to understand is that this isn’t a hard and fast rule at all. It’s a guideline at best, and one that courts are willing to depart from where it doesn’t reflect the actual work involved.
The framework courts still rely on today comes from Toronto General Trusts Corp. v. Central Ontario Railway, a centuries old decision that emphasizes context over formula. Rather than applying a strict percentage, courts look at what was actually done. They consider the size of the estate, but also its complexity, the time spent by the trustee, the level of responsibility assumed, and the results achieved. In other words, the focus is on whether the compensation makes sense in light of the effort and skill required, not just the value of the assets in the Estate.
More recent cases continue to reinforce this approach. In Fitzhenry v. Stevens, the Ontario Superior Court closely scrutinized a trustee’s compensation claim and emphasized that entitlement must be grounded in the trustee’s actual involvement and responsibilities, rather than a mechanical application of percentage guidelines. The Court examined the nature of the work performed, the extent of delegation to professionals, compliance with the trust instrument, and the overall complexity of the administration. The decision reinforces that trustee compensation must be proportionate, justified, and consistent with fiduciary obligations, and confirms that courts will not hesitate to reduce or deny claims that do not reflect the reality of the administration.
Against that backdrop, it becomes easier to understand why compensation on the scale reported in the Rogers estate is being claimed in the first place. The Estate of Loretta Rogers, which has been reported to be valued at approximately $250 million, Larry Tanenbaum and his co‑trustees are said to be claiming compensation based on a 2.5% fee applied to assets flowing into and out of the estate, together with a $1 million care and management fee.
This issue arises most frequently in very large estates, where greater value does not automatically translate into proportionately greater work, yet the application of percentage guidelines commonly used can quickly result in multi‑million‑dollar fees. That disconnect commonly leads beneficiaries to question whether the compensation being claimed is justified. Concerns are particularly acute where trustees have delegated much of the administration to professionals, or where there is limited documentation showing what the trustee actually did. Without transparency, even a well‑intentioned trustee may find themselves subject to increased scrutiny. Trustees in such circumstances may point to the complexity of the estate, including corporate holdings, extensive real estate portfolios, ongoing business interests, tax considerations, and the coordination of multiple professional advisors, as the justification for significant compensation, as well as for care and management fees over a longer administration period. These are, however, precisely the types of situations in which courts tend to take a closer look. Where much of the “heavy lifting” is performed by lawyers, accountants, and other professionals, or where the trustee’s actual involvement is more limited than the numbers might suggest, a strictly percentage‑based approach can begin to look disconnected from the work performed. That tension between the size of the estate and the substance of the trustee’s role is often what drives disputes of this nature.
The good news is that there is a mechanism to address these concerns from the perspective of a beneficiary of an estate. Beneficiaries may require a passing of accounts, which allows the court to review the estate’s financial records and the trustee’s compensation. In that process, the court has the authority to approve, reduce, or, in some cases, deny compensation altogether. The passing of accounts reinforces the principle that trustee compensation is not automatic it must be justified.
One point that often gets overlooked in all of this is that many of these disputes can be avoided entirely with proper planning. Testators have the option of addressing trustee compensation directly in their Wills. They can set a fixed fee, specify a percentage, provide for an hourly rate, or give more tailored direction based on the nature of their estate. Often when hiring a professional trustee such as a Trust Company, Lawyer or other professional these fees will be agreed with appointed trustee and incorporated in the Will. While courts retain some ability to intervene if a provision is clearly unreasonable, clearly drafted compensation clauses go a long way toward setting expectations and reducing the likelihood of conflict.
At the end of the day, estate trustee compensation is less about applying a formula and more about striking a balance. Trustees should be fairly compensated for the responsibility they take on, but that compensation has to align with the work actually performed. For beneficiaries, understanding that balance, and knowing that there are tools available to challenge it where necessary, is key.
As with many areas of estate law, a bit of clarity on the front end can prevent significant issues later on. Whether you are planning your estate, acting as a trustee, or navigating concerns as a beneficiary, having a clear understanding of how compensation works in Ontario can make all the difference. Disputes over trustee compensation often arise when expectations and transparency break down. Whether you are administering a complex estate, planning for the orderly transition of significant assets, or assessing whether compensation being claimed is reasonable, obtaining experienced legal advice early can help avoid unnecessary conflict and cost. Nelligan Law’s estate litigators and estate planners work collaboratively with trustees, beneficiaries, and families to assist with estate planning, address compensation concerns, manage passings of accounts, and resolve estate disputes, with a practical and strategic focus on protecting interests and achieving fair outcomes.