Typically, executor compensation will be governed in one of three ways:
- By a specific term in the Will, setting out a compensation percentage (these terms rarely exist however);
- By the agreement of the beneficiary (this is most common)
- If the beneficiary and executor do not agree, by a court order.
The vast majority of estates see beneficiaries consent to the compensation amount requested by the executor. The executor will first provide an accounting which sets out all of the transactions of the estate, so the beneficiaries can make sure they have no concerns. The executors will then often ask for a sum for compensation, and for their out of pocket expenses. Often, the beneficiaries will agree, and sign a consent.
However, sometimes the beneficiaries feel that the compensation is too high for the work actually done. Or sometimes, there are minor (children) beneficiaries who are unable to provide capacitated consent. In these situations, the executor will need to go to court to seek court approval for their compensation. This approval should be given before the executor actually pays themselves anything.
How will the court fix the appropriate compensation:
There has grown to be a “rule of thumb” that an executor will receive a fee of 5% of the estate, as compensation for their work.
However, in estates which are very large, or, which were not specially complicated, courts routinely reduce compensation to below 5%. After all, 5% of a $2 million estate could be a huge amount of money, which may be too much compensation if the executor only dealt with a straightforward sale of farmland (often assisted by a lawyer).
In terms of the considerations that a court would examine, they include:
- The size of the estate;
- The care and responsibility required to administer the estate;
- The time occupied by the executor;
- The skill and ability displayed; and
- The success in administering the estate.
James Steele’s preferred practise area is estate litigation, including will challenges, executor disputes, power of attorney issues, etc. Contact James Steele at 1-306-933-1338 or j.steele@rslaw.com. The above is for general information only. Parties should always seek legal advice prior to taking action in specific situations.