Executor work can be very lucrative
- Noting that the job of executor requires no experience or qualifications, but can be very lucrative
- Explaining how executor fees are determined
- Giving examples of cases where the court determined executor fees
Do you know how lucrative acting as an executor can be?
It’s a very unique job.
You can be appointed with zero formal qualifications.
And nothing of experience working in the field.
You set your own hours and don’t have to record your time.
But ironically, it could be the highest paid work you ever do.
There’s typically no mention in a will that the executor is entitled to a fee.
But executors are most definitely entitled to one.
There’s a piece of provincial legislation called the Trustee Act. Section 88(1) of that act says: “…an executor…is entitled to…not exceeding 5%…of all the assets of the estate by way of remuneration for their care, pains and trouble and their time spent…”
The median price for a single-family home in Kelowna is in the range of $1.15 million. Five percent of that alone is $57,500.00.
Add on $1 million of investments and you’re up to $107,500.00.
That’s crazy!
But you might have noticed the words “not exceeding” in the excerpt I provided. An executor is not necessarily entitled to the 5% maximum.
So, then, who decides the amount?
At the end of the process the executor will send beneficiaries an accounting, listing all the money that flowed into the estate, all the expenses incurred, and providing a proposed distribution. The accounting will include whatever amount the executor is claiming as a fee.
Would beneficiaries balk at a 5% executor fee if the executor pointed to section 88(1) of the Trustee Act?
Are they likely to seek independent legal advice about whether the claimed fee is fair?
If the beneficiaries don’t agree with the amount proposed by the executor they can require the amount to be determined by the court. But that will cost them, and the estate, legal fees.
Are they likely to want the legal battle?
If the matter does go before the court, a more likely compensation award is in the range of 3%.
In the relatively recent case of Borkovic v. Borkovic, 2023 BCSC 2050, the court awarded 3% with a $1.8 million estate that the judge determined was not complicated, consisting of two rental properties, bank accounts and investments. The judge assessed the care and responsibility involved as minimal.
For simplicity, I am not discussing additional executor compensation such as:
- a percentage of income earned on estate assets, and
- an annual percentage for “care and management” fees.
The total fees the executor in the Borkovic case was awarded was over $75,000.00.
A much smaller estate will entitle the executor to a much smaller fee. For example, in one case the full 5% was awarded for an estate worth $242,503.71, but that worked out to fees of only $12,125.00.
And of course, a much larger estate can get ridiculous. In one case fees of $400,000.00 were awarded for a $10 million estate.
I’ve written previously about how a will-maker can determine the executor fee in advance, by setting it out in their will. I’ve also written about how a will-maker might determine what a fair fee might be when dealing with siblings. Let me know and I’ll help you if you have trouble finding those columns in my archives.
But if the executor fee is not determined in the will, and it likely is not, the executor might be in for an incredibly lucrative line of work.
You might wonder if you would be capable of acting as an executor. I have previously written about the executor job as being a whole bunch of work. Next week, I plan on writing about how accessible the job really is.
