Most people know that an Executor's can charge a fee for administering the estate but few know how to determine the amount. If the Will sets out a specific amount for the Executor's fee, that is the amount that he or she will receive. The Will needs to be reviewed to determine the basis for the Executor's fees. It may be expressed as a dollar amount or as a percentage of the estate and is generally greater than the cost of out-of-pocket expenses.
The Will may also state that an agreement was signed with a trust company. In this case, the will-maker will have agreed on a fee schedule with the trust company at the time the Will was made.
If the Will is silent as to the Executor's fees and there is no other agreement on fees (which is the case with most Wills), the Trustee Act sets out the following rules:
- 5% of the gross aggregate value of the capital of the estate (i.e., the realized value of the original assets without deduction of the value of any mortgages against assets and the value at the date of distribution of any assets distributed in their original form);
- 5% of the income earned during the administration; and
- annual care and management fee of 0.4% of the average market value of the assets.
If an Executor receives a legacy in the Will, it is presumed that this will take the place of Executor fees. But, if the gift is a residual bequest (a gift of whatever is left after specific gifts are given), this presumption will not apply and the Executor is entitled to both the gift and fees. The presumption also does not apply if the Will states that the Executor may take both the gift and fee.
The Executor will need to get the beneficiaries to approve the Executor's fees. If the Executor is unable to get the beneficiaries to agree to the fee, he or she will have to apply to Court. The Court generally will allow less than the maximum or 3% of the estate value as well as a care and management fee. What the Court orders will depend on the size of the estate, the care and responsibility involved, the time occupied in the administration of the estate, the skill and ability displayed, and the success achieved in the final result. The costs incurred in seeking court approval are payable from the estate.
In this regard, it's best to include a clause in your Will stating the Executor's fee so it will not lead to confusion or litigation down the road.