The Executor: Basic Questions and Answers
1. What is an executor?
An executor is a person or company that shall represent the estate of a deceased with respect to matters of administration such as:
- burial arrangements;
- the collection of debts owed to the estate;
- the repayment of creditors;
- the distribution of assets;
- the filing of tax returns; etc.
2. When is the executor hired?
An executor is chosen at the time of making one’s Last Will and Testament and can be one or more persons or a trust company.
3. What are some important considerations when choosing an executor?
When contemplating who to choose to serve the estate as an executor, it is important to have particular regard:
a) to the size of the estate;
b) the complexity involved in the estate administration;
c) the degree to which special skill is required with respect to, for example, the carrying out of the trusts created in the Will or with respect to the investment of estate assets;
d) the likelihood or potential for contentious proceedings;
e) the time commitment required of the executor; and
f) the expectations of the executor,
to name but a few of the important things to consider.
4. Are executors entitled to compensation?
Most definitely. The easiest way to ensure that an executor is compensated is to spell out in specific terms the compensation in one’s Last Will and Testament, which is precisely what subsection 65(1) of the Trustee Act, R.S.O. 1990 allows for.
Absent explicit provisions in the Will respecting an executor’s compensation, subsection 61(1) of the Trustee Act provides that “A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble and the time expended in and about the estate, as may be allowed by a Judge of the Superior Court of Justice.” The Court will generally have regard to five factors when determining adequate compensation, namely the:
(1) magnitude of the estate;
(2) care, responsibility and risk assumed by the executor;
(3) time occupied in carrying out the executor’s responsibilities;
(4) skill and ability displayed by the executor; and
(5) degree of success arising from the executor’s administration.
Moreover, the Court applies, as a rule of thumb, the following percentage guidelines which are subject to being increased or decreased as the particular circumstances in question may justify:
- 2.5 to 3% of the capital receipts;
- 2.5 to 3% of the capital payouts;
- 2.5 to 3% of the income receipts;
- 2.5 to 3% of the income payouts; and
- for trusts created in the Will including ongoing trusts an annual fee of:
- 2/5 to 3/5 of 1% of the average annual market value of the trust asset(s); and
- 5 to 6% of the income generated by the trust(s).
Notwithstanding the above, executors should nonetheless expect to be required to substantiate their claim to compensation. The case law makes clear in fact that proper accounts must be kept in order to evidence receipts and disbursements and proper logs should be kept of time expended by an executor throughout the administration.
Finally, an executor should always prepare itself for a potential challenge from a beneficiary seeking to have the executor’s accounts audited. The Court proceeding pursuant to which this may occur is know as a passing of accounts, and the very possibility of such proceedings should also compel an executor to keep complete and accurate records.