January 2012-I don't think it's a bold statement to suggest that being an executor isn't much fun. Beyond the emotional element of delving into the various affairs of someone who has recently died --often a close friend or loved one -- the job can be tough, laden with responsibilities.
Among other duties, the executor arranges for the burial, collects and converts assets, satisfies debts, addresses bequests, files taxes and, eventually, distributes the residue.
Accordingly, executor compensation is worth consideration. When warranted, executors should be compensated for their valuable work and this may be something to consider in your estate plan with your lawyer.
Of course, compensation isn't going to be relevant all the time. Consider where the bulk of an estate passes to a surviving spouse who is also the executor: compensation may make little sense. Executors may have other reasons to forego some or all of their fees.
The Trustee Act provides the statutory entitlement to executor compensation but there are no legislated fees.
One approach is to set out a fee (or formula) in the will. This may provide some certainty, although, determining fair compensation before the estate is administered may be difficult.
Otherwise, courts have recognized -as a guideline only- the "usual percentages": generally, 2.5% of what goes in and 2.5% of what goes out (i.e., receipts and disbursements of the estate).
There is also what is referred to as a "care and management fee" (two fifths of 1% of the annual value of the estate assets); however, such a fee is usually limited to estates where administration extends over long periods of time.
Every estate --in planning and administration - has its own unique set of circumstances so appropriate compensation may well increase or decrease from those "usual percentages" for any given estate.
Any compensation has to be approved by the beneficiaries or by the court. "Pre-taking" fees is generally not allowed. So, it is important that executors take steps to ensure their time and work is well documented. In approving compensation courts look at a variety of factors including estate size, time spent, skill and ability required, care and responsibility involved and relative successes in administration.
Being an executor involves necessary and important work --and is something of an honour when you consider that a testator often appoints an executor after much thought about who is the person best suited and most trusted to administer the estate and carry out last wishes. Appropriate compensation for the job done is only reasonable.
Of course (like most other paying jobs), executors are taxed on any compensation received.