Determining Estate Trustee Compensation

October 3, 2012 Hull & Hull LLP Executors and Trustees Tags: 0 Comments

According to section 61(1) of the Trustee Act, “A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice”.  Historically, there have been two methods used to determine what amounts to “fair and reasonable”: the five factors approach, and the percentage approach.

The five factors approach was espoused by Teetzel J. in the decision of Re Toronto General Trusts Corporation and Central Ontario Railway (1905), 6 O.W.R. 350 (H.C.).  These factors include: (1) the magnitude of the trust; (2) the care and responsibility springing therefrom; (3) the time occupied in performing its duties; (4) the skill and ability displayed; and (5) the success which has attended its administration.

On the other hand, in order to bring predictability and consistency to compensation, the practice of determining compensation as a percentage value of the estate developed.  The current guidelines include:

a)    2.5% charged on capital receipts;

b)    2.5% charged on capital disbursements;

c)    2.5% charged on revenue receipts;

d)    2.5% charged on revenue disbursements; and

e)    If the estate is not immediately distributable, an annual care and management fee of 2/5 of 1% on the gross value of the estate.

In the case of Re Jeffrey Estate, (1990), 39 E.T.R. 173, the two methods were combined.  At page 179, Killeen J. stated:

“To me, the caselaw and common sense dictate that the audit judge should first test the compensation claims using the "percentages" approach and then, as it were, cross-check or confirm the mathematical result against the "five-factors" approach”.

The approach of combining the two methods was upheld in the decision of Laing Estate v. Hines.  At paragraph 9, the Court of Appeal stated:

“We agree with and adopt the approach taken in Re Jeffery Estate.  In our view, it best achieves the appropriate balance between the need to provide predictability while, at the same time, tailoring compensation to the circumstances of each case”.

Thank you for reading … Have a great day!

Suzana  Popovic-Montag

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