The work of an estate trustee can be a time consuming and often exhausting role, with the possibility of a wide range of tasks. Unfortunately, there continues to be disputes in some estate administrations as to how much an estate trustee should be compensated for their work. Objections about compensation usually come from beneficiaries whose shares obviously shrink the larger the portion of the estate that is given as estate trustee compensation (“compensation”).
Hooke Estate, 2013 ONSC 1674 (CanLII) was a case in which the often used tariff for calculating compensation was successfully challenged and reduced based on analysis of the work actually performed by the estate trustee. Solicitor, William George Jeffery, was appointed as estate trustee by Mary Hooke before she died. As is required practice, Mr. Jeffery charged the estate separately for his work as estate trustee and for solicitor work he performed for the estate. The tariff that is often used by estate trustees and accepted by courts in setting the compensation is:
(a) 2.5% to 3% of capital receipts;
(b) 2.5% to 3% of capital disbursements;
(c) 2.5% to 3% of income receipts;
(d) 2.5% to 3% of income disbursements; and
(e) for ongoing trusts, 2/5 of 1% or 3/5 of 1% of the average annual market value of the trust assets as the fee for ongoing care and management, and 5% to 6% of income generated by the trust.
However, as was found in Hooke Estate, courts are not married to this mathematical formula and will examine the work actually done by the estate trustee to determine whether the claimed amount should be adjusted up or down so as to be fair and reasonable. In deciding that Mr. Jeffery’s compensation should be reduced from his claimed amount of $13,094.74 to $10,787.88, the court determined that the percentages of the tariff do not dictate that rates should be charged that do not reflect the time spent, complexity of the work performed or the value of the estate. The court went on to observe that it “was by all accounts, a relatively uncomplicated estate to administer. The work was completed within a year…There were no court proceedings to deal with. The work performed did not require great skill and ability. Indeed, for someone of Mr. Jeffery’s experience level, he has been practicing law since 1975, the work involved can only be described as routine.”
Thus would be estate trustees are warned to consider the relevant factors for setting compensation outlined in case law. Where a certain amount of compensation is desired and someone is approached to act in the role before the testator’s death, they are advised to have the amount agreed upon with the testator written into the will, which is done by professional estate trustees (for example, trust companies). Where they are considering performing the role after an individual has died, they are advised, if possible, to contract with the relevant parties to be paid the desired amount before starting any tasks.
If you would like advice regarding estate trustee compensation, including the amount that should properly be claimed or effective wording for a will or contract, please contact Andrea Kelly.
Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.