Taking on the role of an estate trustee can be a difficult one. The tasks typically involve gathering in and managing assets, determining liabilities, and moving the administration of an estate forward until it is time to distribute the net assets to the beneficiaries. While there is a general principle that an estate should be wrapped up within 1 year (also known as the “executor’s year”), completing the administration of an estate can often take much more time. This may especially be the case where there has been complicated estate and tax planning or where there are assets in various jurisdictions, for example. Further, complex or high value estates naturally involve more work and oftentimes, as we well know, conflict and litigation.

Although acting as an estate trustee may often feel like a thankless job, the principles of estate trustee compensation seek to establish fairness when it comes to recognizing the work performed.

The guidelines for determining the amount of estate trustee compensation have developed in the common law. One of the foundational cases is Toronto General Trusts Corp v. Central Ontario Railway.[1] This case sets out 5 factors to take into consideration when determining the appropriate quantum of compensation: (a) size of the trust; (b) care and responsibility involved; (c) time occupied in performing the duties of the trustee; (d) skill and ability shown by the trustee; and (e) success resulting from the administration of the estate by the trustee.

More recently, the courts have adopted a tariff approach to determining the amount of compensation: the usual rule is that an estate trustee is entitled to compensation in the amount of 5% of the value of the estate, being 2.5% compensation on capital receipts and disbursements, and 2.5% on revenue receipts and disbursements. However, this is only a rule of thumb. There is no automatic entitlement to estate trustee compensation. The compensation claimed must be reflective of the work performed. Indeed, compensation is income earned according to the Canada Revenue Agency.

Moreover, beneficiaries may challenge the quantum of compensation claimed on an estate trustee’s application to pass its accounts, or in the ordinary course of an estate administration. The beneficiaries of an estate have a right to know how much the estate trustee intends to take in compensation and pre-taking compensation while the administration is ongoing and without an explicit right to do so is generally not allowed.

If the issue of compensation is brought before the Court, ultimately, the final determination of the amount of compensation remains discretionary. The Court has expressed that estate trustee compensation is not a windfall. Further, the Court may reduce compensation where the application of the usual percentages would result in over-compensation.[2] For example, in Atkinson Estate, Re, the Court reduced the executor’s compensation to 1% on a large capital receipt of $2,103,656.89 (life insurance policies and a bank account).[3] Similarly, in Cheney v Byrne (Litigation Guardian of), the Court reduced the estate trustee’s compensation to reflect an overall discount for “big ticket items” (i.e., transactions of significant value in the estate trustee’s accounts).[4] The Court has noted that an estate trustee’s failure to keep detailed dockets of duties performed is a factor to consider in determining an appropriate level of compensation.[5]

An estate trustee must remain cognizant of all of the above and in particular the 5 aforementioned factors in order to ensure the compensation claimed is justifiable and can ultimately be paid.

[1] Toronto General Trusts Corp v Central Ontario Railway, (1905), 6 OWR 350, 1905 CarswellOnt 449 (ON Weekly Ct).

[2] Pachaluck Estate v DiFebo, 2009 CarswellOnt 2278, at para. 51.

[3] Atkinson Estate, Re, 1951 CarswellOnt 404, at para. 25.

[4] Cheney v Byrne (Litigation Guardian of), 2004 CarswellOnt 2674, at para. 140, 154.

[5] Pascale Estate v Stark, 2014 ONSC 6684, at para. 32