New Brunswick Court Reduces “Windfall” Trustee Compensation

September 25, 2019 Suzana Popovic-Montag Estate & Trust, Estate Litigation, Estate Planning, Ethical Issues, Trustees, Uncategorized, Wills 0 Comments

One steady source of estate litigation is the uncertainty around estate trustee compensation. There is no statutory formula for determining the appropriate quantum. Instead, estate trustees come up with a percentage that is supposed to reflect their contributions, and the beneficiaries are left with the options of accepting, objecting, and everything in between. If matters proceed to court, judges apply an age-old customary analysis in order to find a number that suits the unique circumstances of the estate administration. One of the five factors the courts look at is the size of the estate. Whereas traditionally bigger estates have led to bigger compensation, we have seen a potential turning point out in New Brunswick in the case of Atlantic Jewish Foundation v. Leventhal Estate, [2018] N.S.S.C. 297.

Trustee Compensation

Section 61 of the Trustee Act directs that estate trustees be paid “fair and reasonable allowance[s]” for their “care, pains and trouble”. Over time, courts have set the “tariff guideline” or customary rate at “2.5% of each of the capital receipts, capital disbursements, revenue receipts, and revenue disbursements” (Freeman Estate, Re, [2007] O.J. 3402 at para. 30). This rate must be cross-checked, however, against the five factors, which look at the actual work done, before a final quantum is reached.

Size and Complexity

Historically, estate trustees have earned more in administering bountiful estates, and vice versa. The administration of a small yet convoluted estate has typically been far less lucrative than the administration of a large estate comprised of a handful of simple assets. Courts have, however, been ready to reduce compensation when an estate, despite its net value, involves little complexity – for instance, when the assets are easy to liquefy and distribute (see Forrest Estate v. O’Donohue, [1991] O.J. 1898 (Gen. Div.) at para. 14).

A Deviation in New Brunswick

What is unique with the compensation reduction in Atlantic Jewish Foundation is that the estate trustee’s duties were not particularly simple. He managed the deceased’s hotel, sold it at a good price, oversaw numerous agents, and generally displayed skill and sophistication. Yet the court slashed his proposed compensation in half – a pronounced reduction – and did so not on the basis that the estate was simple, but that he should not receive remuneration that was tantamount to a “windfall or a bequest”. Certainly his case was not helped by the fact that the objector, and residuary beneficiary, was a charity, and that he was seeking $900,000 for 77 hours of work …

In the wake of this case, it will be interesting to see if other courts lessen compensation because the figure is merely too high, rather than applying percentages that coincide with the work done.

 

Thanks for reading,
Suzana Popovic-Montag and Devin McMurtry

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