Being an Estate Trustee can be a thankless job. I frequently joke with clients that if they really hate someone they should name the person their executor. While the job can be difficult and stressful, one silver lining is that an Estate Trustee is typically entitled to be paid compensation for the role. But what happens when the Estate Trustee also receives a bequest in the Will? Is the Estate Trustee entitled to charge compensation on the bequest which they make to themselves?
On more than one occasion I have been told matter of factly by counsel when attempting to negotiate an Estate Trustee’s compensation that an Estate Trustee cannot charge compensation on any bequest made to themselves, and that the value of the bequest to the Estate Trustee must be deducted from the figure being used to calculate compensation. The position that an Estate Trustee cannot charge compensation on distributions to themselves is often stated as something which should be common knowledge. But is it actually true that an Estate Trustee cannot charge compensation on bequests to themselves? Like most good legal questions the answer is of course “it depends”.
Re Mortimer, [1936] O.R. 438 (ONCA), is frequently cited as authority for the position that an Estate Trustee cannot charge compensation on distributions to themselves. Indeed Widdifield on Executors and Trustees cites to Re Mortimer in part in support of the following statements:
“Early cases have held that transactions in which money is paid by the executor from the estate to himself are excluded from compensation.”
Widdifield notes that more recent cases including Re Cohen, (1977) 1 E.T.R. 80, have distinguished themselves from the more traditional rule in Re. Mortimer, and allowed the Estate Trustee to charge compensation on distributions to themselves. In Re Cohen, in considering the more traditional rule from Re Mortimer, the court states:
“An examination of Re Mortimer, supra, reveals that in the first instance the executor endeavoured to pay himself compensation on his own legal account which was disallowed on appeal. However, this case is not authority for the proposition set forth in the first sentence of the quotation. It seems clear to me that an executor has a duty to pay the legacies and bequests no matter to whom they are left by the will. This could include himself in his personal capacity, and as this is part of the executor’s administration of the estate he is entitled to compensation on the items in question and at 2 1/2 per cent.” [emphasis added]
It is perhaps an indictment of the pace at which estate law can change that anything from 1977 can still be referred to as the “modern” approach. What cases like Re Cohen suggest however is that it should not be automatic that an Estate Trustee cannot charge compensation on bequests to themselves, with the bequest potentially being no different than any other distribution to be considered as part of the wider “five factors” from Toronto General Trusts Corp v Central Ontario Railway, (1905) 6 O.W.R. 350, in quantifying compensation.
Thank you for reading.