By Patrick McMurchy
There are two categories of fees an executor may claim.
The first is a one-time fee based on the gross aggregate value of the assets of the estate. Here, the executor’s fee is limited to a maximum of 5% of that value.
The other is typically charged annually for the care and administration of the estate, which has a limit of 0.4% of the market value of the assets of the estate.
The maximums are rarely, if ever, allowed should the matter come before the court.
In many cases, an executor will waive any claim to fees. This often happens where there the executor is also one of a few beneficiaries and, because the estate pays the fees, taking a fee would reduce the amount to be divided among the beneficiaries including the executor.
In the event that executor’s fees are claimed, they are not usually a source of contention. The beneficiaries simply consent to the fees and the estate can be wound up.
In practice executors usually only ask for the one-time fee and an argument based on a percent point or two – the difference between two or three percent, for example – is perceived as a waste of time and money.
Where the executor’s fees are not consented to by all beneficiaries, the executor must apply to have the accounts, which include the claim for fees, to be passed by a judge called a Registrar.
For the first category of fee, the one-time charge, the court will look at: the size of the estate; the level of care and responsibility the executor had to apply; the time spent administering the estate; the skill and ability displayed by the executor and, the final result achieved in the administration of the estate by the executor.
The criteria to assess the appropriate level of annual care and management fees are: the value of the estate assets being managed; the nature of the assets, (e.g. managing an active business vs. managing a locked in investment); the length of time the assets were manage; the skill and ability displayed by the executor in the care and management and, whether there was some extraordinary service rendered by the executor.
Obviously, the executor should have maintained an accurate accounting of all expenses charged against the estate and have reasonably accurate estimates of the time spent as part of the demonstration of skill and abilities. The standard is one of reasonableness not perfection.
However, hearings to pass executor’s accounts and fees are often the last battle in a war waged between beneficiaries. So, another part of the assessment of the executor’s skills and ability is how the executor has conducted themselves towards the beneficiaries, and how the beneficiaries have treated the executor. To complicate matters further, it often happens that the executor is also a beneficiary.
In such cases, the executor must show that they have acted as a neutral party and has treated all beneficiaries equally. If not, the fees may be reduced. On the other hand, hostile beneficiaries may have made unreasonable demands of the executor, usually relating to accounting issues and financial disclosure, and this can have the effect of increasing the executor’s fees.
This short article is intended to give the reader a general understanding of some of the basic principles respecting fees that can be charged by an executor in the administration of an estate. It is not intended as legal advice. In estate litigation, outcomes very much depend on the specific facts of each case.