Executor and Trustee Compensation

Executors and trustees may be categorized into two basic types: the professional, and the layperson. The professional trustee is generally a trust company, lawyer or any other professional who provides executor and/or trustee services as a professional service and for a fee. The layperson trustee encompasses all others, even if they claim and receive compensation.

For many professional trustees in British Columbia today, compensation is generally governed by separate agreement, and almost invariably so where a trust company is involved.

The layperson trustee and any professional trustee who does not have a compensation agreement must rely on the provisions of the Trustee Act of British Columbia. Under these statutory provisions, a trustee is entitled to claim three types of compensation.

CAPITAL FEE

This may be a one-time fee where the trustee is making an immediate distribution of the estate or trust property, or a fee levied on each capital distribution where the trust is longer term, or a combination of both (for example, 2% paid following the initial administration of the estate, followed by 2% on each capital distribution made).

The fee is calculated as a percentage of the gross value of the estate at death, or the trust property settled on the trustee. The maximum permitted is 5%, an amount generally reserved for complicated estates or trusts.

INCOME FEE

This is an annual fee, calculated as 5% or less of the income earned from the estate or trust fund. Although 5% is the maximum allowed, it is generally accepted as the amount claimed.

CARE & MANAGEMENT FEE

This fee is based upon the average value of the estate or trust fund, generally on a calendar year. It is calculated as 0.4% of the average value; for example, if the estate is worth $1M at the beginning of the year and $2M at the end of the year, the average value is $1.5M and .4% is $6,000.

TIMING OF PAYMENT

Where there is no compensation agreement referred to in the will or trust document, the trustee should not “pre-take” compensation until he or she either has the approval of all the beneficiaries to the proposed compensation, or where the court has approved it. Court approval will always be needed where there are disabled, minor or unborn beneficiaries. The costs of such a court application are usually borne by the estate or trust fund.