Executorship is Not for the Weak! Executor Fees – What Are They and Should You Claim them?
If you’ve ever acted as the Executor of an estate, you understand it’s no easy feat! To recognize an executor’s time and effort spent administering the estate, the Trustee Act of British Columbia provides the opportunity for executors to claim compensation of up to 5% of the gross aggregate value of the estate.
Most Wills include a clause that specifically addresses executor compensation and our firm’s practice is to confirm whether you wish to include this provision. In more complex situations—particularly where a corporate executor is involved—the testator and executor may enter into a separate compensation agreement. These agreements can override the default rules under the Trustee Act, but only if they are properly incorporated into the Will.
Incorporating Compensation Agreements Into a Will
For a standalone compensation agreement to be valid and enforceable:
- It must be incorporated by reference into the Will.
- A vague or general reference is not enough.
- In some cases, attaching the agreement directly to the Will may be appropriate.
- The agreement must already exist when the Will or any codicil is executed.
Without proper incorporation, the executor may be limited to the compensation permitted under the Trustee Act.
What if my Will is Silent on Compensation
If the Will does not specify compensation, beneficiaries often agree on what is reasonable. When they cannot agree—or lack legal capacity to do so—the matter may need to be resolved by the court.
When determining appropriate compensation, the court considers several factors, including:
- The size and complexity of the estate
- The degree of care and responsibility required
- The time spent administering the estate
- The executor’s skill and ability
- The overall success of the administration
Courts may also consider the nature of decisions involved and the level of expertise required. Their goal is to award compensation that is fair to both executors and beneficiaries, without automatically defaulting to the 5% maximum.
Challenging Executor Compensation
Beneficiaries may challenge the compensation set out in a Will, though courts are generally reluctant to interfere with compensation expressly provided by the will maker. Most reported cases involve executors seeking additional compensation rather than beneficiaries seeking a reduction.
How Executor Fees Are Paid
Executor fees are treated as estate expenses and are typically paid from the residue of the estate. In large estates, these fees can be significant.
Did you know that executor fees are considered taxable income? For this reason, you may wish to waive claiming a fee
Looking to claim? We always recommend you obtain professional tax and legal advice!
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637.