Executor compensation is a common issue in estate litigation. The executor is the person appointed by the will to administer the estate and distribute the estate assets according to the terms of the will. Sometimes a clause in the will states that the estate must pay a certain fee to the executor for completing his or her executor’s duties. These clauses are called charging clauses. When a will does not contain a charging clause, the British Columbia Trustee Act (the “Act”) governs executor compensation.
The Act imposes a maximum on what an executor can be paid. The maximum is 5% of the gross aggregate value of the estate assets, including capital and income. Gross aggregate value means:
- If an original estate asset is sold, the proceeds of that sale.
- If an original estate asset is distributed to beneficiaries (people who receive assets under the will), the value of that asset at the time of distribution.
- If an original estate asset remains in the estate when the executor seeks compensation, the value of the asset at that time.
In addition to this one-time fee, an executor may receive a maximum of 0.4% per year as a care and management fee. This fee is based on the average value of the estate during that year and is awarded for looking after the estate on a day-to-day basis. Keep in mind that these are maximum values and, in most cases, executors receive less, either by agreement or court determination. It begs the question, however, of whether an executor can ever receive more than the maximums under the Act?
Notwithstanding the language of the Act, in limited circumstances,additional fees can be awarded. These additional fees are for an executor’s professional fees (for example, a lawyer or accountant) in addition to fees paid for executor’s duties under the Act. In other words, these fees are not awarded for normal executor’s duties. They are awarded for an executor’s professional work that goes beyond normal executor’s duties. It is important to remember that a court will not award these additional fees in every case. The fees must be reasonable and well-documented. Of course, every case turns on its own facts.
For those interested in a flavour of the case law, the following are cases of interest: Fraserview Intermediate Care Lodge Co. v. Canada Trust Co., 2003 BCSC 1920; Smith Estate v. Smith Estate, 2000 BCSC 1842.