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Wednesday, September 4, 2013

Can the executor charge a fee on an asset that was not on the estate inventory?


A reader wrote to me to ask about some of the logistics of an executor taking her fee. The amount of compensation claimed by an executor is almost always a bone of contention, and this case is no different. Her question and my answer appear below:

"When an executor takes the fee from the estate, is it from the balance after all expenses are paid...as in i.e. funeral home and say revenue Canada (bills that are required to complete in payment) they then take their percent on the balance? My sister (executor of my Mom's estate) took 2 months after of my Mom's passing 5% of the value of the estate at the time of death. But she is also stating that a RBC investment (which was in both their names to save probate and taxes) was in the estate and she paid herself (without consent). I say it is wrong, there is 8 of us siblings, (including her) 6 have signed the release and 2 have not."

An executor's fee is normally calculated on the gross amount of the estate, i.e. before the expenses you  mentioned are taken out. This is because executors have responsibility for all assets going into the estate, whether or not there are debts.

I assume that the RBC investment that you mentioned was distributed among the siblings in the same way as everything else under the will. Obviously if your sister kept the funds to herself, she would not be charging an executor's fee on it, and you guys would have a different set of issues.

It seems to me that if the executor distributed the investment as part of the estate, it only makes sense for it to be included in her executor's fee.

The part that I find irritating about all of this is that the executor took the full 5% of the estate, and did so after only two months. Normally 5% is the maximum fee allowed, and it is meant to be claimed by those executors who have months or years of work on the estate, or  have particularly complex estates to deal with (such as winding down a  business, property overseas to be sold, etc). Obviously I don't know much about this particular estate, but if any of those things existed here, they wouldn't have been resolved only two months after your Mom's passing. Unless there are other complexities in this estate, it seems to me that the executor is charging too high a percentage.

If you don't agree with the amount of compensation she has claimed, you can negotiate that with her. Hopefully you will all be able to come to an agreement without her having to approach the courts for a passing of accounts. She should not have paid herself before getting the releases signed. If the amount agreed upon or ordered by the court is less than what she has paid herself, she will have to repay it to the estate.

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