“Pre-taking” Compensation by Property Guardians: Plan Ahead
Trustees often run into difficulties when they pay themselves compensation prior to passing their accounts. They are said to have "pre-taken" compensation, meaning having paid themselves compensation prior to passing their accounts. Fortunately for guardians of property (and attorneys), section 40 of Ontario’s Substitute Decisions Act allows guardians to pay themselves compensation at intervals during the guardianship before passing their accounts:
(2) The compensation may be taken monthly, quarterly or annually.
Amounts taken monthly or quarterly could be divisions of a calculated "annual" amount, but this provision contains no element requiring equal divisions. Regardless of how the property guardian takes compensation, any payment is subject to court approval. Clients applying for guardianship should always be advised specifically of this point: if the court later disagrees with the compensation taken, the guardian may have to repay such amounts. This holds true even where the Management Plan pursuant to which the guardian is managing the incapable person’s property authorizes the compensation the guardian has taken.
This raises another important consideration for lawyers in the application for guardianship stage. Any compensation taken, or claimed later on a passing of accounts, should not be inconsistent with the provisions of the Management Plan. Because the right to compensation is statutory, as are the prescribed percentages (though subject to discretionary reduction by the court), there is no need to declare an intention to take compensation in the Management Plan. But if the Management Plan contains a provision disclaiming compensation, for instance, no compensation should be taken during the guardianship.
Have a great day,
Christopher M.B. Graham – Click here for more information on Chris Graham.