Occasionally, I (like many of fellow bloggers for sure) get asked – what is appropriate remuneration for an executor or executrix to administer an estate – often in circumstances where remuneration is not specified or even referred in the deceased’s will or otherwise. Bottom line, what are the guidelines and how much is enough?
A recent court case in the Supreme Court of British Columbia Le Gallais Estate (re) 2108 BCSC 388 dealt with this issue in the context of unique circumstances.
In this case, Ms. Le Gallais had a long-time friend, who was also her solicitor, draw up the will, and had her named executrix. The friend also managed Ms. Le Gallais’ financial and personal affairs under power of attorney until her death.
Ms. Le Gallais’ funeral arrangements were pre-planned with no memorial. Her estate consisted of financial assets including cash, securities and proceeds of a life insurance policy. The estate’s value was approximately $1.6 million. As the deceased had no family or other heirs, the entire estate was to be shared equally among several charities specifically named in the will.
The solicitor/executrix presented a claim for executor’s remuneration for an amount approximating $39,000, equal to 2.5% of the estate’s assets and a separate claim for legal services provided for approximately $17,500. These claims were contested by the beneficiaries.
The Court referred to estate case law which sets out certain criteria associated with an estate that need to be considered in the determination of executor remuneration such as the magnitude of the estate, its complexity, time spent on the estate, and desired outcomes. Generally speaking, executor remuneration should not exceed 5% of the capital assets.
With the evidence heard, the Court determined that the executrix was entitled to $25,000, noting that while the estate was of a certain magnitude, it was not very complex and risky. Further the Court noted that the executrix was quite familiar with the deceased, her extended family circumstances and the nature of her financial affairs.
As to the matter of the claim for legal services provided, the Court found the services described were not reasonable in the context of a solicitor’s estate-related work. The Court felt that some of the services charged were more properly characterized as executors’ work and in fact duplication of work. In the end, the Court reduced the claim to approximately $5,500.
Every case (or estate) is different. This case is a good reminder that executor remuneration should be determined in a fair and reasonable fashion with reference to appropriate guidelines.
Larry AmstutzApril 10, 2018 - 2:43 pm
My father passed away 7 years ago this March and I accepted the role of Executor;both of us lived in BC. His estate was small and not very complex; however he lived on Vancouver Island and I lived near Vancouver. This necessitated ferry trips to the Island, which meant extra time away, etc.
To the point: he did not provide direction for any executor compensation in his will. Legal advice I received at the time was to have a letter drafted by the estate lawyer requesting permission from the heirs (my 4 siblings) for me to have a 1.5% fee. Fortunately they all signed off, as it had to be unanimous agreement.
The only drawback to this was that a T4 had to be done and I ended up having to pay income tax on my fee.
If my father and I were better informed I know he would have agreed to include a fee in the will itself. If it was reasonable it would not have been contestable, taxable, or susceptible to unanimous agreement.
Dan MajewskiApril 10, 2018 - 5:39 pm
Executor fees are taxable as employment income whether or not the executor’s remuneration is mentioned is stipulated in the will.