Should you claim executor’s fees?


If you are named the executor in a will and decide to take on the appointment, you will be entitled to compensation for services rendered to the estate.  The compensation amount can be specified in the will or in a separate fee agreement. If it is not explicitly set out, you may claim a “fair and reasonable” fee under s. 88 of the Trustee Act (British Columbia). The maximum fee permitted under that section is 5% of the gross aggregate value of the estate.

Executor’s fees are considered to be expenses of an estate, and are generally paid from the estate, and in most cases, paid from the residue of the estate. When the estate is large, the fees can be substantial.

However, in some circumstances, you may not want to claim a fee. Why?

Fees received for services rendered are generally taxable income, and fees paid to an executor are no exception. This means that you must include the executor’s fees you receive as taxable income and pay tax accordingly. On the other hand, if you are a beneficiary, then you do not pay tax on any amount that you receive as a beneficiary.

If you are the executor and the only beneficiary of the estate, then it might not make much sense to claim an executor’s fee at all since you would have tax to pay on that fee. If you waive the fee altogether, then more money would pass to you as a beneficiary on a tax-free basis. A similar situation arises where two or more siblings are the executors of the estate and the only residual beneficiaries.

If you are not the only beneficiary of the estate, but the only residual beneficiary of the estate, then you may wish to seek professional advice before making a decision on a claim for executor’s fees. Although executor’s fees are in most cases paid from the residue of the estate, there are exceptions depending on the nature of the required management for the specific bequests under the will. Accordingly it may be possible to charge fees relating to the management of specific assets that were left to other beneficiaries under the will.