In British Columbia, executors of an estate are entitled to a maximum compensation of 5% of the gross aggregate value of the estate under the Trustee Act, RSBC 1996, c. 464 for their care, pains, trouble and time spent. The Trustee Act also provides for a maximum fee of .4% of the average market value of the assets on a yearly basis for the care and management of the assets by the executor. However, these provisions of the Trustee Act are not applicable where the executor’s or trustee’s compensation has been fixed by the will or trust.
Where the will is silent as to the amount of compensation for the executors, the beneficiaries will often agree on a reasonable amount. However, where the beneficiaries cannot agree or do not have the legal capacity to agree, the compensation may have to be determined by the court. When the court is faced with the task of determining executor compensation they will look at various factors. McColl Estate (1967) 65 W.W.R. 110 (BCSC) is one of the leading cases in British Columbia that has discussed the factors that should be used in determining executor compensation, including:
- the magnitude of the estate;
- the care and responsibility involved;
- the time occupied;
- the skill and ability displayed; and
- the success achieved in the final results.
Other factors that may come into the analysis of compensation are the nature of the decisions that have to be made and the experience required. The court will endeavor to give compensation that is reasonable to both the executors and the beneficiaries while not being liberal or slavish to the 5% maximum under the Trustees Act.
It is clear from McColl Estate that the value or magnitude of the estate alone is not always determinative of the value of the executor compensation. For a example, a large estate that is held in cash will likely result in less executor compensation than a smaller estate compromised of more complex assets.
Although there is little British Columbia case law, it may invariably happen that beneficiaries will challenge executor’s compensation set by a will. The courts are, in the main, not willing to interfere with executors compensation when it has been set by a will, although most of the cases are the result of executors asking for further compensation and not beneficiaries seeking a reduction in executor compensation.
Under a will, there is typically a clause that deals specifically with compensation of the executors. Often when the calculation of compensation is more complex, such as with corporate executors, the compensation of executors may be dealt with in a compensation agreement between the testator and the executor. In order for these separate agreements to be valid, thereby entitling the executor to the fee under the agreement rather than the Trustee Act, the agreement must be incorporated by reference into the will. The agreement should not be generally referred to in the will and it may be appropriate to have the agreement attached to the will in some cases. As a result, the agreement must be in existence at the time of the execution of a will or codicil.
If you believe you require legal assistance with an estate dispute and would like to speak with someone about your concerns please contact Estate & Trust Litigation Practice Group Chair Mark Weintraub at 604.643.3113 or firstname.lastname@example.org.