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Friday, April 29, 2011

Does the court decide the executor's fee?

I get many, many questions on my blog about executors and what the heck they are supposed to be doing. It's not surprising really, since most executors have never done the job before and are learning as they go. One topic that I hear a lot about is the executor's pay - how much it should be, who decides, where the money comes from, etc.

Most recently I was asked whether the court decides the executor's fee. This question can be answered on two levels. One is the general question of whether the courts in any given province set guidelines for all estates. The other is whether a judge sets the fee for a particular executor in a given case. Let's look at both.

If you are an executor working on an estate, to determine your fee you will look first to the will. If the will says how much you are to get, then that is how much you get. Courts rarely interfere with that under normal circumstances, as the amount in the will is the amount the deceased wanted to pay. An example of situations that might be outside of "normal circumstances" is that in which a beneficiary is challenging the executor's actions on the basis that they caused a loss to the estate. In that situation, the court might decide that the executor has to repay the estate by foregoing the executor's fee.

An executor's fee might also be set by the court in an individual case if there has been an estate lawsuit or other complication that the executor had to deal with - something over and above what most executors have to do.

If the will doesn't say what an executor is to be paid, then the amount is negotiable between the executor and the residuary beneficiaries. If they all come to an agreement on the fees, as is the usual case, there is no reason for a judge to be involved. If an agreement simply can't  be reached, then a judge will set the fee.

This is where the discussion leads into the more general realm of courts setting fees for all estates. In some provinces there is a fairly specific formula for calculating the fee. In others, there is only the guideline that the fee be "fair and reasonable". Over time, the decisions of our courts, when looked at together as a group, clarify the formulas and guidelines to give judges, lawyers and executors more certainty as to what fee is appropriate.

This body of law - that being the laws themselves and the cases decided on them - give the framework for the negotiations between the executor and the beneficiaries. This body of law tells us that an executor should receive between 1% and 5% of an estate, barring unusual circumstances as I mentioned above. So we know, for example, that if an executor who has looked after a relatively simple estate decides that he wants 30% of the estate for a fee, he is asking too much.

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