Upon nearing the completion of an estate administration, an executor/estate trustee typically presents a proposed statement of compensation to the beneficiaries. If all beneficiaries agree, there is no need to seek court approval.

However, if a consensus cannot be reached between the executors and beneficiaries regarding the quantum of compensation, the executor must initiate a court procedure known as a “passing of accounts”. This involves the executor compiling a comprehensive record of all their activities, detailing every financial transaction involving the estate. The executor then seeks the court’s approval of this accounting and their request for compensation.

During this process, beneficiaries have the opportunity to raise objections to any items in the executor’s accounts, including concerns about the requested compensation. If necessary, the matter proceeds to a court hearing where a judge determines whether to approve the executor’s accounts and establishes a fair amount of compensation. If the accounting reveals any mismanagement of the estate by the executor, the judge may order the executor to reimburse the estate.

It’s important to note that receiving compensation does not mark the end of the executor’s obligations. Executor compensation is considered taxable income, as it is payment for the executor’s services rendered to the estate. Therefore, the executor must ensure that this income is reported correctly. For non-professional executors, this entails the estate, acting as the “employer”, filing a T4 and making appropriate statutory deductions.

In certain cases, a testator may attempt to provide a gift to the executor in the Will instead of compensation, aiming to avoid taxes on the compensation. However, whether this gift still qualifies as executor compensation and is subject to taxation depends on how it is structured in the Will. Evaluating the specific circumstances would be necessary to determine its tax implications.

If you are an executor struggling to secure compensation from an estate you are administering, or you are a beneficiary that feels an executor’s claim for compensation is too rich, please don’t hesitate to reach out to see how we may be of assistance.

Thank you for reading and have a great day!

Suzana Popovic-Montag and Geoffrey Sculthorpe