All About Estates

Estate Trustee Compensation – Discretionary Factors

Acting as an estate trustees can be hard work: it is often a time consuming and thankless job. As a result, estate trustees are entitled to seek compensation for their work. However, while few people would begin a new job without first agreeing on their salary, the amount of compensation paid to an estate trustee is usually determined at the end of her administration.[1] A high degree of discretion goes into determining the amount: intangible factors, such as job performance and the overall “success” of the administration, are often given as much weight as the value of the estate.

Authority to Award Estate Trustee Compensation

Section 61(1) of the Trustee Act, RSO 1990, c T.23, gives the court the authority to award an estate trustee compensation. Section 61(1) reads:

Allowance to trustees, etc.

61 (1) A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice.

Factors to Determine Quantum of Compensation

Unlike compensation for attorneys for property and guardians of property,[2] the guidelines for determining the amount of estate trustee compensation has developed exclusively in the common law. One of the foundational cases is Toronto General Trusts Corp v Central Ontario Railway,[3] which sets out five factors to take into consideration when determining the appropriate amount of compensation:

  • the size of the trust;
  • the care and responsibility involved;
  • the time occupied in performing the duties of the trustee;
  • the skill and ability shown by the trustee; and
  • the success resulting from the administration of the estate by the trustee.

More recently, the courts have adopt a tariff approach to determining the amount of compensation: compensation is calculated at 2.5% of transactions into and out of the estate (leading to compensation roughly equal to 5% of the value of the estate). Where estate administration spans multiple years, a yearly management fee of 2/5 of 1% of the value of the estate may also be charged. Nevertheless, the tariff calculations are used as a first step and the resulting amount is adjusted, either higher or lower, based on a review of the five factors listed above.[4]

Exercise of Court Discretion

While the development of tariff guidelines has introduced a greater degree of predictability into the determination of estate trustee compensation, the final determination of the amount remains discretionary. A recent example of the role more intangible factors may play in determining trustee compensation was set out in Winkworth v Murray, 2022 ONSC 907.

In that case, the judge was asked to determine a number of accounting issues which, it was hoped, would lead to the final distribution and winding up of the estate. Among those issues was the claim for estate trustee compensation advanced by the two co-estate trustees, who had occupied opposing sides during much of the litigation that had plagued the estate for the last seven years.

Anne, Robert, and James were the equal beneficiaries of their mother’s estate. Anne and Robert were appointed as co-estate trustees. They divided their tasks: Anne managed the administration of their mother’s house and Robert managed the administration of their mother’s liquid assets.

The estate administration was highly acrimonious and Anne was often pitted against her brothers in the litigation. However, after seven years, the estate administration was nearing completion. Anne and Robert sought compensation in the amount of 5% of the gross value of the estate. Anne sought to divide the compensation 75% for her and 25% for Robert; Robert sought an equal division of 50% each. It should be noted that there was no agreement on the gross value of the estate. Furthermore, James opposed either Anne or Robert receiving compensation.

The court held that compensation was justified: both Anne and Robert expended time, care, and effort to fulfil their duties as estate trustee. However, the quantum was subject to court discretion.

Because a detailed accounting of the estate administration had not been provided, the tariff calculations were of little assistance to the court in this case. Instead, the judge looked primarily at the five factors and held:

  • The estate (valued at between $850,500 and $987,201) was “significant.”
  • Anne’s job administering the real estate was more complex than managing the liquid assets, as tenants were involved. However, Anne did not manage the administration of the real estate efficiently or effectively.
  • Robert was a co-estate trustee, so he bears some of the responsibility for the overall lack of skill that was shown in managing and selling the properties.
  • Time spent was difficult to assess, as Anne inflated her time and, conversely, Robert claimed he was “prevented” from performing his duties. However, the court held that Robert’s arguments rang hollow: “Laying back and complaining later will not suffice.”
  • Lastly, the court held that this was not a “successful” administration given the length of time and number of disputes between the parties.

In particular, the court criticized the inability of Anne and Robert to work together. The judge held: “Anne and Robert demonstrated significant ability in finding ways not to cooperate to complete the estate administration.” And later:

I think being an estate trustee means having to compromise. It does not mean taking a last opportunity to obtain vindication or revenge for past wrongs. The vitriol demonstrated in the materials of all three residual beneficiaries was telling. The executors were 2/3 of the overall problem. Compensation should not be substantial to reflect the overall poor results an wasted time and funds needed to draw this matter to a close.

In the result, the court awarded Anne and Robert $12,500 each – roughly half of what they sought.

[1]      Two exceptions are: (i) where the will itself specifies the amount of compensation owed to the estate trustee, or the procedure for determining the amount; or (ii) where the court order appointing an estate trustee sets out the amount or procedure for determining compensation.

[2]      The guidelines for determining the compensation for attorneys for property and guardians of property is set out in the Substitute Decisions Act, 1992, O Reg 26/95. However, the court maintains the authority to vary the amount of compensation in appropriate cases.

[3] (1905), 6 OWR 350, 1905 CarswellOnt 449 (ON Weekly Ct).

[4]      A summary of the more modern approach to calculating estate trustee compensation can be found in Re Jeffery Estate, [1990] OJ No 1852, 1990 CarswellOnt 503, 39 ETR 173 (ON Surr Ct).

About Gillian Fournie
Gillian is a lawyer with de VRIES LITIGATION LLP. Her practice focuses on the area of trusts and estates litigation. gfournie@devrieslitigation.com

1 Comment

  1. Malcolm Burrows

    August 31, 2022 - 3:05 pm
    Reply

    Gillian – What an excellent piece. Thank you for sharing with the world. Malcolm

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