An executor is entitled to be compensated for the care and time spent administering an estate and carrying out the wishes in a Will. BC executor’s fees can be quite substantial, particularly for high-value estates—though as our estate litigators recently discussed, the size of the estate is just one of the factors in determining fair executor’s compensation. In a recent case, Litt Estate, 2020 BCSC 1921, the executor sought total remuneration of over $650,000 for administering an estate valued at approximately $10 million. On a passing of accounts, the BC Supreme Court agreed that fees as claimed were excessive but concluded that a still hefty lump sum of $400,000 was appropriate remuneration in the circumstances.
Animosity among siblings following their parents’ deaths
The Litt Estate litigation involved six siblings (four daughters and two sons). The siblings’ parents died within two months of each other. The parents had executed mirror wills, which left everything to one another, and, on the passing of both of them, their estates were to be divided among the siblings, with the lion’s share of the estate to the two sons. Originally both sons Terry and Kasar had been joint executors. However, due to a conflict of interest arising from Kasar’s claims against his parents’ estate (discussed here in an earlier post from our BC estate litigation team), Kasar withdrew as an executor. In addition to Kasar’s unjust enrichment claim against the estate, the daughters commenced a wills variation action, alleging their parents’ wills did not adequately provide for them. Kasar’s claim was dismissed, but the daughters—who were represented by one of our BC estate litigation lawyers, Jackson Todd—succeeded in obtaining a substantial variation in their favour (see here for our blog post on the successful wills variation claim).
Executor’s fee determined by BC Court on passing of accounts
The siblings’ relationship was marked by animosity that carried through the estate litigation, and continued on the passing of accounts by Terry Litt, one of the six siblings, who acted as the sole executor. As executor, Terry sought total remuneration in the amount of $654,449.34 for both estates. The other siblings disputed the amount claimed. As the Will did not stipulate the executor’s fee entitlement, BC’s Trustee Act applied to the determination of “fair and reasonable” remuneration. Here are the key legal principles that apply to the setting of BC executor’s fees under the Trustee Act:
- BC’s Trustee Act provides that an executor is entitled to remuneration to a maximum of 5% of the gross aggregate value, including capital and income, of all of the estate.
- Remuneration does not have to be fixed as a percentage of the gross aggregate value of the estate. It can be calculated as a lump sum determined on a quantum meruit basis (which is the reasonable value of the services rendered) provided it does not exceed the 5% maximum.
- The executor is also entitled to apply annually for a fee for care and management of the estate in addition to the remuneration allowed under the Trustee Act. The care and management fee must not exceed 0.4% of the average market value of the estate assets.
The criteria to be considered in determining the appropriate amount of remuneration are the magnitude of the estate, the care and responsibility involved, the time occupied in administering the estate, the skill and ability displayed, and the success achieved in the result.
Determining appropriate executor’s fee in Litt Estate
Applying the criteria set out above, the BC Supreme Court found that the amount claimed was excessive, and instead fixed a lump sum executor’s fee on a quantum meruit basis in the amount of $400,000. The circumstances which influenced the determination included the following:
- Magnitude of the Estate. The estate was valued at roughly $10 million, the bulk of which came from the sale of the farm and the family home. In addition to the two properties, there was rental income from a suite in the family home, lease income from the farm property, rental income from radio towers situated on the farm property, jewelry, and property and a bank account in India.
- Care and Responsibility. The two major assets, the family home and the farm, were passive assets and much of the work involved in their management and sale was done by a host of experts. That being said, the executor put in considerable time selecting the appropriate lawyers, accountants, appraisers, and realtors. It was also noted that the executor brought a degree of expertise to the task of organizing the estate’s extensive personal and business financial records. When considering the care and responsibility of the executor, it was also noted that he travelled to India to secure estate properties and assets there; he made use of his personal line of credit in order to save the estate money in interest by paying for the estate’s tax liability; he instructed counsel with respect to the estate litigation; and he was required to defend actions brought by his brother Kasar and his sisters. There was an awkward division between Terry’s role as executor and his role in his personal capacity within the litigation. However, he was able to successfully differentiate between those two roles.
- Time Involved. The estate involved six beneficiaries and was administrated over a period of three and a half years. The executor estimated that the time taken to administer the estate was between 1500 and 1700 hours, but he did not keep time records.
- Skill and Ability Displayed. The executor displayed skill and ability in handling the estate, which the beneficiaries conceded. The executor maximized the size of the estate with appropriate tax choices and the use of his own personal line of credit at no cost to the estate. His choice of the appropriate experts also assisted in making the administration go smoothly to the estate’s benefit.
- Success Achieved. The executor achieved success overall measured in maximizing the estate’s assets and income for division among the beneficiaries. He provided detailed accounts which could be approved by the other beneficiaries, the properties were sold in a timely fashion at market rates, and all the estate’s income sources and other assets were secured.
The executor and all beneficiaries were also awarded their costs of the passing of accounts on a special-costs basis, payable by the estate.
Bottom line on BC executor’s fee disputes
An executor is entitled to fair and reasonable compensation. If the Will does not stipulate the executor’s entitlement and the parties cannot agree, the Court will be called on to resolve the fee dispute. The Court will apply BC’s Trustee Act to determine fair and reasonable remuneration, subject to a 5% ceiling. The size of the estate is a factor in determining appropriate executor’s fees, but large estates are not necessarily more complex or time-consuming to administer.