A Saskatchewan court recently issued a decision setting out the considerations for the determination of reasonable allowance for the administration of an estate.
The deceased was a 60 year-old bachelor when he died on January 24, 2017.
According to the Statement of Property submitted in the Application for Grant of Probate, the deceased died with cash assets of $4,041; personal effects of $10,600; and $2,701 in Canada Pension benefits. Additionally, and most significantly, he owned $819,600 of real property, consisting mainly of farmland.
In his will dated August 13, 2007, after gifting $4,000 to four charities and a gift of $200 to the executrix, the deceased divided the remainder of his estate three ways among four beneficiaries: one-third to his step-father; one-third to a female relative; and one-third to be divided equally between his cousins.
The executrix of the estate applied for an order to receive five percent of the value of the estate, or $41,847, as an appropriate executrix’s fee. Her application was opposed by two of the major beneficiaries, the deceased’s cousins. They proposed that reasonable compensation to the executrix would be one percent of the value of the estate.
What was the appropriate remuneration to pay the executrix?
Applicable Legal Principles
Trustee compensation (where remuneration is not determined by the trust instrument) must be “a reasonable allowance for administration of an estate.” Section 52(1) of The Trustee Act, 2009 states:
52(1) Unless remuneration is determinable by the trust instrument, a trustee is entitled to a reasonable allowance for administration of an estate, including remuneration for professional services rendered to the estate by a lawyer who is a trustee.
Additionally, s. 52(3) of The Trustee Act, 2009 states:
53(3) The court may vary a term of a trust or instrument creating a trust that fixed the remuneration of a trustee other than by contract between the settlor or testator and the trustee if that term does not provide for sufficient remuneration.
Finally, under case law, the five considerations applicable to assessing a trustee’s fee or allowance are:
- The magnitude of the trust;
- The care and responsibility springing therefrom;
- The time occupied in performing its duties;
- The skill and ability displayed; and
- The success which attended its administration.
The court acknowledged that the estate was large, but turned its considerations to the complexity and time spent in the administration of the estate.
The executrix claimed she had spent 320 hours administering the estate. While the court accepted this number of hours, it found that if she were to receive five percent of the estate as a reasonable fee, her hourly rate would exceed $130. The court disagreed with this amount, concluding:
“If the court accepts [the executrix]’s notes which, as she states, show she spent 320 hours administering the estate, a reasonably generous hourly fee for a lay person might approximate $50 per hour, or $16,000. As a percentage of the estate value ($836,943.56), $16,000.00 equals 1.9 percent. [T]he court finds that a fixed compensation of $16,000.00 is a “reasonable allowance for administration of an estate,” as required by s. 52(1) of The Trustee Act, 2009.”
The highly-experienced and strategic Calgary estate lawyers at DBH Law can help you draft or update your will to reflect the needs of your family and your estate, no matter its size or complexity. Our responsive and concise approach to our work makes the process of will and estate planning easy for our clients.
We take pride in the relationships we have built with our clients, and the opportunities we have to represent their legal needs as they grow and evolve. We understand your need to provide for your family and loved ones while also minimizing the taxation and chances of litigation your estate may face. We can be reached by phone at 403.252.9937 or online and look forward to the chance to learn about what is important to you, and how we can help you achieve that.