Executors are allowed to charge the estate reasonable executor fees for the time spent fulfilling their duties. There are no set fees for compensating an executor (personal representative); only suggested fee guidelines (see below).
(Note: the term “personal representative” is the current legal term used to refer to an executor/executrix, administrator/administratix, and judicial trustee.)
The only ways that executor fees can be formally set is either from directives in the deceased's will or by consent of the beneficiaries of the estate. In the absence of either of these two conditions, the executor must provide a “passing of accounts”. When a will establishes set fees, that is the maximum that can be paid to the executor(s) unless the beneficiaries agree to a higher amount, or the court orders so.
Factors in Establishing Executor Compensation
The court may consider a number of factors to establish the amount of the executor's compensation. These include the:
- Value of the estate
- Level of care and responsibility required
- Complexity and extent of the executor's work, time involved, problems encountered, and amount of revenue received and disbursements made
- Executor's skill, ability, and specialized knowledge
In the case of an insolvent estate, executor fees take priority over all other claims against the estate except for reasonable funeral and testamentary expenses, which take first priority.
When there is more than one executor, the allocation of fees can either be approved by the beneficiaries or determined by the court, with consideration of amount and value of each executor's contribution.
Executors may be entitled to additional compensation in certain circumstances, such as managing or directing a business or when unusual difficulties or situations are encountered.
It is advisable that executors keep track of all activities, time spent, and receipts and disbursements made, in the event that any issues arise regarding their compensation. In such cases, the executors must provide this accounting to the beneficiaries.
Executors are also allowed to take their compensation before the administration of the estate is complete in certain circumstances: if it's provided for in the will, if the beneficiaries agree, or by court order. In some circumstances, the compensation may be reduced by the courts, in which case the executor must reimburse the excess amount, plus interest, to the estate.
Estate Administration Suggested Fee Guidelines
The Suggested Fee Guidelines were published in 1995 by the Surrogate Rules Committee for guidance only, and not as a tariff.
The guidelines set out four categories of executor fees:
- Fees charged on the gross capital value of the estate. 3% to 5% is charged on the first $250,000; 2% to 4% on the next $250,000; and 0.5% to 3% on the balance. According to the Fee Guidelines, compensation on revenue receipts is 4% to 6%.
- Fees charged on revenue received by the estate during the administration.
- Care and management fees charged in trust estates. The executor may be compensated for care and management of the estate property if there is no distribution of property at the date of death, and the beneficiaries have agreed not to change the trust.
- Additional compensation. In some cases an executor may provide services that are outside the scope of regular administration duties, such as directing, managing, or winding up a business, or preparing income tax returns. In such cases, additional compensation may be allowed.
The executor(s) are allowed to be reimbursed for any out-of-pocket expenses incurred, such as travel expenses, as long as they are considered reasonable. Receipts for these expenses are not normally required, but it is good practice for the executor to keep receipts in the event of a dispute.
Any fees received by an executor, other than reimbursement of expenses, are treated as income and therefore subject to income tax. GST does not have to be added to the compensation unless the executor's work is carried out as part of the executor's commercial activity.