Written on December 15, 2014 – 10:49 am | by Jasmine Sweatman
Pascale v. Stark a recent decision of Justice Douglas reviews (in some cases based on old decisions and the Jenkins’ textbook) some estate trustee compensation issues when calculating compensation.
The estate trustee made application to pass her accounts and passed away before responding to the Notice of Objections so that the succeeding estate trustee had to rely on the affidavit of the legal assistant of the lawyer acting for the estate trustee at the hearing. This may explain some of the results in this case. There was also as best we can determine no discussion of any particular language in the Will that may have addressed some of these issues; nor was there any reference to a compensation agreement. The decision again confirms that the “usual percentages” are not automatic and is only a guide.
A summary of the rules and directions covered:
Investment Losses: the value of the loss is to be deducted from the capital disbursements on which the compensation is to be claimed.
Value of Real Property: The amount of any encumbrances, real estate commission, taxes (HST and property) and legal fees are to be deducted from the value of the property prior to calculating compensation if these transactions were not dealt with by the Trustee.
Large Receipts & Disbursements: the application of the usual percentages (i.e. 2.5%) is to be scrutinized using the five factors on large transactions, such as the sale of real property and subsequent disbursements. The usual percentage (2.5%) on a large transactions, such as the sale of a house is typically reasonable given the sale of a house generally requires more work, but is not as reasonable on the distribution of the net proceeds as this requires relatively little action on the part of the Trustee.
Payments to the Trustee: transactions in which money is paid to an executor are excluded from the compensation calculation.
Professional Fees: simple accounting services, such as those pertaining to preparing the accounts for passing are properly deducted from the compensation of the estate trustee. Only the legal fees incurred for advice and assistance to the trustee in relation to their duties is a proper expense of the estate (in this case since they were not and had to refunded there was no comment on whether compensation can be taken on the legal fees that are considered proper).
Timing of Compensation: The estate trustee is entitled to compensation for all transactions undertaken by him/her after assuming the role of trustee, which is often before the issuance of a Certificate of Appointment. Trustees should take note of the date they begin acting/assumed the role as any transactions prior to that date are not to be included in the compensation calculation.
Overall this decision reminds us of the difficulties in dealing with compensation – leading to the conclusion that we may be better serving our clients if we engage in more fulsome discussions about compensation and start incorporating compensation agreements in our wills and powers of attorney.
Until next time,
Jasmine Sweatman/Leigh Sands