Acting as an executor can involve far more time and responsibility than many people expect.
An executor may need to identify and protect estate assets, communicate with beneficiaries, apply for probate, pay debts, address tax matters, maintain detailed records, sell property and distribute the estate. Even a relatively straightforward administration can take months to complete.
It is reasonable for an executor to ask whether they may be compensated. It is equally reasonable for beneficiaries to want a clear explanation of any compensation being requested.
In British Columbia, executor compensation is not calculated using an automatic percentage. The amount must be fair and reasonable in the circumstances, subject to the terms of the will and any required approval process.
This article uses the word “executor” for simplicity. Similar rules may apply to administrators and other personal representatives.
Can an Executor Be Paid in British Columbia?
Yes. Section 88 of British Columbia’s Trustee Act permits an executor to receive a fair and reasonable allowance for the care, responsibility, time and effort involved in administering an estate.
The allowance cannot exceed 5% of the gross aggregate value, including capital and income, of the estate assets.
The legislation also permits a person entitled to compensation under section 88 to apply annually to the Supreme Court of British Columbia for a care and management fee. The court may allow a fee of up to 0.4% of the average market value of the assets.
Neither amount is automatic.
The 5% Figure Is a Maximum, Not a Standard Rate
An executor is not automatically entitled to receive 5% of an estate.
In Mikaloff (Re), 2018 BCSC 756, the Court confirmed that maximum compensation is not awarded routinely. The amount must be appropriate, fair and reasonable in the circumstances.
The value of the estate is relevant, but it is not the only consideration.
For example, a high-value estate consisting mainly of one property and a bank account may require less work than a smaller estate involving:
- Several properties
- A privately owned business
- Missing financial records
- Assets outside British Columbia
- Difficult tax issues
- Claims against the estate
- Disagreements among beneficiaries
- Litigation involving the estate
The appropriate amount depends on the administration as a whole, not simply the estate’s value or the time that has passed.
What If the Will Addresses Executor Compensation?
The will should be reviewed before compensation is calculated or paid.
A will may:
- Set a specific dollar amount
- Provide a particular percentage
- Include a formula for calculating compensation
- State that the executor may claim compensation under BC law
- Provide a gift intended to recognize the executor’s work
- Limit or exclude compensation
Section 90 of the Trustee Act provides that the statutory compensation rules do not apply where the allowance is set by the instrument creating the trust. In an estate administration, that instrument will generally be the will.
The precise wording matters. A gift made to an executor is not necessarily intended to replace compensation. Similarly, a compensation clause may require interpretation before the executor can determine what may properly be paid.
Where the language is unclear, legal guidance may help the executor and beneficiaries understand the effect of the clause.
How Do BC Courts Assess Reasonable Compensation?
British Columbia courts consider the work and responsibility involved in the actual administration.
Factors considered by the courts include:
- The size or magnitude of the estate
- The care and responsibility involved
- The time occupied in the administration
- The skill and ability displayed
- The success achieved in the final result
No single factor determines the appropriate amount.
The Size of the Estate
A larger estate may involve more assets, transactions, institutions and reporting. However, estate value does not necessarily reflect the amount of work required.
A high-value home may be relatively straightforward to administer. A smaller estate containing rental properties, corporate interests, foreign assets or incomplete records may require considerably more effort.
The Care and Responsibility Involved
An executor may be responsible for securing property, maintaining insurance, managing investments, dealing with tenants, responding to creditors and making decisions that affect several beneficiaries.
The degree of responsibility may be greater where assets are difficult to manage or beneficiaries have competing interests.
The Time Required
Time records can help demonstrate what work was completed and why it was necessary.
The overall length of an administration may be relevant, but time alone does not justify a particular fee. An estate may remain open because of tax processing, litigation, market conditions or other matters outside the executor’s control.
Executors should keep records as the work is completed instead of attempting to reconstruct their activities at the end.
The Skill and Ability Displayed
Some estates require careful financial, business or property-management decisions.
An executor is not expected to replace a lawyer, accountant, appraiser, realtor or tax professional. Obtaining qualified assistance can be part of administering an estate responsibly.
The executor’s organization, judgment, communication and record-keeping may still be relevant when compensation is assessed.
The Results Achieved
The administration is considered as a whole.
Relevant questions may include:
- Were estate assets identified and protected?
- Were debts and taxes addressed?
- Were adequate records maintained?
- Were beneficiaries kept reasonably informed?
- Were unnecessary expenses avoided?
- Was the estate moved toward distribution efficiently?
- Were difficult issues handled responsibly?
Success does not mean guaranteeing investment returns, property values or a conflict-free administration. It generally concerns whether the executor managed the estate prudently and effectively in the circumstances.
Executor Compensation Is Different From Expenses
Executor compensation, expense reimbursement and professional fees should be recorded separately.
| Category | What it generally covers |
| Executor compensation | Payment for the executor’s care, time, effort and responsibility |
| Expense reimbursement | Repayment of reasonable estate expenses paid personally by the executor |
| Professional fees | Fees charged by lawyers, accountants, appraisers, realtors and other professionals |
The Trustee Act distinguishes executor compensation from reimbursement for expenses actually incurred in administering the estate.
Depending on the circumstances, reimbursable expenses may include:
- Court and registry charges
- Postage and document expenses
- Reasonable travel required for estate business
- Property-maintenance expenses
- Valuation and appraisal costs
- Properly incurred professional fees
Executors should preserve invoices and receipts and avoid combining expense reimbursement with their compensation request.
What Happens When Professionals Assist the Executor?
Hiring a lawyer, accountant, appraiser, realtor or other professional does not automatically prevent an executor from receiving compensation.
Professional fees and executor compensation serve different purposes. Professionals are paid for their services, while the executor is compensated for the care, time, work and responsibility involved in administering the estate.
The estate accounts should clearly identify:
- The work completed by the executor
- The services provided by each professional
- The professional fees paid by the estate
- The expenses personally incurred by the executor
- The compensation requested by the executor
Clear records help beneficiaries understand the request and reduce the risk that the same work appears to have been charged twice.
Whether a professional expense or compensation claim is reasonable depends on the circumstances of the estate.
How Is Executor Compensation Approved?
The appropriate process depends on the will, the estate accounts, the interests of the beneficiaries and whether there is disagreement.
Where the will does not conclusively set the amount, the executor may seek informed written approval from all persons whose financial interests would be affected and who are legally able to provide that approval.
Consent may not resolve the issue where the estate involves:
- A beneficiary who is a minor
- A beneficiary who lacks legal capacity
- An unascertained or unborn beneficiary
- A contingent interest
- A continuing trust
- A beneficiary who has not agreed
- Incomplete estate accounts
- A dispute about the executor’s conduct or compensation
Additional procedural steps or court approval may be required in these situations.
Applying to Pass Accounts or Fix Compensation
Rule 25-13 of the Supreme Court Civil Rules permits a personal representative or a person interested in an estate to apply for:
- An order passing the personal representative’s accounts
- An order fixing and approving the personal representative’s remuneration
- Both forms of relief
The court may decide the matter or direct a registrar to conduct an inquiry, assessment or accounting.
Where the personal representative brings the application, supporting affidavit evidence and detailed estate accounts are required.
Executors Should Not Simply Withdraw a Fee
Before compensation is paid from estate funds, an executor should consider:
- What the will says about compensation
- Whether the estate accounts are complete
- Whose interests will be affected
- Whether all necessary approvals have been obtained
- Whether a court application is required
- Whether tax withholding or reporting obligations apply
Taking compensation without clear authority or an appropriate approval process may create an avoidable dispute.
What Should Estate Accounts Include?
Clear estate accounts allow beneficiaries, and the court where necessary, to understand how the estate was managed.
The accounts should generally identify:
- The assets and liabilities of the estate
- Capital transactions
- Income received
- Debts and taxes paid
- Professional fees
- Executor expenses
- Interim distributions
- Assets remaining for distribution
- The compensation being requested
- How the proposed compensation was calculated
Rule 25-13 requires detailed financial information when accounts are formally passed before the court.
Even where a formal court application is unnecessary, organized accounts can make it easier to answer questions and obtain informed approval.
For a broader explanation of probate and estate administration, read Pathfinder Law’s Comprehensive Guide to BC Probate.
Can Beneficiaries Question the Compensation?
Yes. Beneficiaries may request information about how the compensation was calculated and what work the executor completed.
Concerns may arise where:
- The executor claims the maximum percentage without explanation
- The proposed fee appears disproportionate to the work
- The estate accounts are incomplete
- Expenses and compensation have been combined
- The administration involved unexplained delays
- Professional services have not been clearly separated from the executor’s work
- The requested amount may conflict with the will
- Estate assets or transactions have not been adequately explained
Questions do not necessarily mean that the executor has acted improperly. Executors and beneficiaries may simply have different understandings of the work, complexity and responsibility involved.
Detailed records and clear communication can help prevent a disagreement from becoming a formal estate dispute.
Is Executor Compensation Taxable?
Executor compensation is generally taxable income.
The Canada Revenue Agency distinguishes between fees earned in the regular course of a person’s business and fees earned by someone who does not ordinarily provide executor or administrator services.
Depending on the circumstances, the compensation may be treated as business income or as income from employment or tenure of office. The applicable withholding and reporting obligations may also differ.
An executor who is also a beneficiary should keep their compensation separate from their inheritance.
Executors and estates should obtain accounting or tax advice before compensation is paid or reported.
Practical Steps for Executors
An executor considering compensation should:
- Review the will carefully. Determine whether it sets, limits or otherwise addresses compensation.
- Keep contemporaneous records. Record significant tasks, decisions, time spent and communications.
- Maintain clear estate accounts. Separate capital, income, expenses, professional fees and executor compensation.
- Preserve receipts and invoices. Each reimbursement should be supported and connected to the estate administration.
- Explain the calculation. Do not rely on a percentage without showing why the requested amount is reasonable.
- Communicate with beneficiaries. Provide sufficient information for affected beneficiaries to understand the request.
- Confirm the approval process. Determine whether the will, informed consent or court approval governs the payment.
- Address tax reporting. Obtain advice about applicable withholding, remittance and reporting obligations.
Practical Steps for Beneficiaries
A beneficiary reviewing a compensation request may consider:
- What the will says about compensation
- The value and complexity of the estate
- The length of the administration and reasons for any delay
- The executor’s records of the work completed
- Whether expenses and professional fees are separately identified
- Whether the compensation calculation is clearly explained
- Whether the amount appears proportionate to the responsibility involved
- Whether independent legal or accounting advice is appropriate
A beneficiary should understand the estate accounts and the effect of any consent or release before signing it.
How Pathfinder Law Can Help
Executor compensation can become sensitive because it involves family relationships, financial records, personal responsibility and the administration of a loved one’s estate.
Pathfinder Law assists clients with probate and estate administration, estate taxation, applications for estate grants and other wills and estates matters.
Depending on the circumstances, legal guidance may help an executor or beneficiary:
- Understand a compensation clause in a will
- Review estate accounts
- Identify information that may be missing
- Understand the available approval process
- Assess whether a proposed amount requires further review
- Determine whether a court application may be necessary
Pathfinder Law serves clients in Abbotsford, Langley, Chilliwack, the Fraser Valley and communities throughout British Columbia.
Contact Pathfinder Law for a complimentary 20-minute consultation by telephone or videoconference to discuss your circumstances and possible next steps.
Disclaimer: This article provides general information only, not legal advice. Every situation is unique. For guidance about your specific circumstances, contact Pathfinder Law for a complimentary consultation.