Executor remuneration

Can the executor you appoint to administer your estate claim a fee?

Back in July, I wrote about saving your loved ones the burden of being your executor by hiring a professional. I gave a long list of executor duties, which can become the equivalent of a part-time job. (I’m happy to send you a link to that column, just send me an e-mail request.)

When hiring a professional executor you enter into a fee agreement, just like you would for any other service. That fee agreement sets out what that professional executor will be paid for performing that service.

Most of us simply name a parent, sibling, child or friend to be our executor. This column is about the fees that an executor can claim when there isn’t a fee agreement.

As with most things legal, the law about executor fees is based on a piece of legislation but comes to life with the way courts apply the legislation to the real world. The legislation is section 88 of the Trustee Act which can be accessed here (https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/96464_01#section88).

Section 88 sets out these maximums that an executor can claim:

1. Five per cent of the total value of the estate.

2. Five per cent of the income earned by the estate while it is administered.

3. An annual “care and management” fee of 0.4% of the average value of the estate assets.

The judge in an often-cited legal decision called Berhard v. Wist 2011 BCSC 101 said the percentages provide a rough guide to assist in assessing an executor’s remuneration, and in the end analysis, the court must be satisfied the amount claimed bears some reasonable relationship to the work and responsibility involved.

A list of factors has been consistently applied by judges when assessing the portion of executor fees that are based on the percentage of total assets and income:

• Size of the estate

• Amount of care and responsibility involved

• Amount of time spent by the executor

• Skill and ability displayed

• The level of success achieved

The “care and management” fee is a separate matter. The judge in Re Pedlar, [1982] 34 B.C.L.R. 185 (S.C.) is often quoted as giving the same list of factors but adding:

1. The nature of the estate assets being administered, i.e. is it an active business, a farm, an investment property, portfolio of investments, etc.

2. Whether or not some extraordinary service has been rendered in the care and management of the estate.

A judge isn’t required to assess executor fees if all the beneficiaries agree on executor compensation. Most of the time an agreement is reached so a judge isn’t required to step in.

Because court decisions don’t occur unless there’s a big enough dispute that an agreement cannot be reached, they often include circumstances where an executor has not done a stellar job, resulting in a lower amount of compensation.

Each court decision is based on the facts and circumstances of the particular case. Without legal expertise, it can be difficult to determine how particular court decisions might apply to your situation.

I have reviewed all the court decisions I could find on this topic that were decided from 2018 on Court decisions are publicly accessible online. (If enough people e-mail me with interest in how to access them, I will host a Zoom demonstration.)

The lowest executor percenage was zero in a case where the executor tried to swindle the beneficiary by selling a property to their daughter far below market value. The highest was 5%, but that resulted in only a modest fee of $12,125 because the total value of the estate was only $242,503.71. The highest executor fee was $400,000, which was 4% of a $10 million estate.

A helpful guide might come from Borkovic v. Borkovic, 2023 BCSC 2050, where there was an approximately $1.8 million estate. The estate was assessed by the judge as not being complicated, consisting of two rental properties and bank accounts and investments. The judge assessed the care and responsibility involved as minimal.

I say that might be a helpful guide because most people’s assets consist of their home and some investments. The average home value in the Central Okanagan is in the range of $1 million.

The executor was awarded 3% of the total value ($55,334.97) plus 2.5% of the income earned ($3,453.89), as well as care and management fees of 0.2%, which given the length of time between death and the assessment was another $17,782.84.

I intend to write follow-up columns about executor remuneration to address questions that arise.

How might you avoid the unfairness of one of your children, who you appoint as executor, getting a windfall amount of fees just because the estate is large? How about the unfairness of your executor taking on a whole lot of work and receiving very little compensation because the estate is small? How might you, as a will-maker, best prevent a court fight about executor remuneration?

From an executor perspective, what might you do to maximize the amount of remuneration you will be entitled to?

Please send me any other questions you might have about executor remuneration. I always appreciate questions.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.