When the Will Provides for Compensation (Sort of…)

September 29, 2015 Joshua Eisen Executors and Trustees Tags: , 2 Comments

Under section 61 of the Ontario Trustee Act, an estate trustee is normally entitled to compensation in an amount that is “fair and reasonable”.  There is a sound body of case law regarding the proper quantum of compensation, but it generally applies only where the will is silent as to compensation.  Usually, it’s clear whether a will addresses compensation or not, but sometimes it can be a little bit tricky if the will also includes a gift to the estate trustee.

At law, where the will also leaves a legacy to an estate trustee, there is a presumption that the legacy is intended to be in lieu of compensation.  However, this generally arises only when the gift is made to the estate trustee in his or her capacity as estate trustee.  Additionally, this presumption will give way to even a slight indication that it was not intended to be in lieu of compensation.

For example, in the B.C. case of Canada Permanent Trust Co. v. Guinn, the will appointed a trust company and Ms. Guinn to be the executors.  The will also left a bequest of $40,000 to Ms. Guinn.  The trust company took the position that she was entitled to her $40,000 and nothing further in terms of compensation.  Looking first to the will, the Court determined from the wording of the clause appointing the executors that Ms. Guinn’s role was meant to be nominal and that the primary responsibility for administering the estate was intended to fall to the trust company.  Paired with that, the bequest to Ms. Guinn was thought to be disproportionately large for her limited role and was also disproportionate in that the legacy to her was double that left to any blood relative of the deceased.  These facts were sufficient to convince the Court that the legacy to Ms. Guinn was not to be in lieu of compensation.

Interestingly, the Court noted that extrinsic evidence of the surrounding circumstances would be admissible for the purpose of determining this question.

This issue does not arise very often, but when it does, it touches upon some interesting questions about the interpretation of wills and the origins of an estate trustee’s entitlement to compensation.  Before the enactment of statutory provisions entitling an executor or administrator to remuneration, he or she would not have been entitled to any compensation at all unless the will or trust provided for it or unless the beneficiaries agreed to it.  While compensation has been the norm in Ontario for a very long time, there are other jurisdictions that still adhere to the traditional rule that compensation can only be claimed where allowed under the will or by the beneficiaries.

2 Comments

  1. marion.ahearn@rbc.com 4 years Reply

    Hello Joshua – am I understanding the above correctly in that Ms Guinn did in fact get compensation on top of the $40K legacy gift? The line above ‘These facts were sufficient to convince the Court that the legacy to Ms. Guinn was not to be in lieu of compensation’. I would have thought that given her role was deemed minimal involvement that the legacy of $40K was all that she should get? Kindly clarify the logic for me. Many thanks!

    • Joshua Eisen 4 years Reply

      Thank you for your comment. The fact that the $40,000 figure would be disproportionate to the amount of work that the testator would have intended for Ms. Guinn to perform in administering the estate was relied upon to determine that this was not intended to represent her compensation for acting as executor. Rather, the Court held that it was meant simply as a gift, to stand independently from any entitlement to compensation. This left the door open for Ms. Guinn to advance a claim for statutory compensation.

      However, the Court did not resolve the question of how compensation should be divided between Ms. Guinn and the trust company. It appears that Locke J. had been asked by counsel to reserve any decision with respect to the division of work between the two executors. Unfortunately, there doesn’t seem to be anything further reported, so I am unable to say whether she was actually awarded any compensation.

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