Tag: deductions

13 Feb

Expenses Deducted from Estate Trustee Compensation

Ian Hull Estate & Trust, Estate Planning, Executors and Trustees, General Interest, Passing of Accounts, Uncategorized, Wills Tags: , , , , , , , 0 Comments

Pursuant to the testamentary document of a deceased, or the Trustee Act, an estate trustee may take compensation. We have previously blogged on the calculation of estate trustee compensation.

However, in calculating compensation, there are certain expenses that will be deducted from the compensation to which an estate trustee would otherwise be entitled. As a general rule, expenses paid to a third party for tasks that are properly a part of the main duties and expected expertise of the estate trustee (i.e. “executor’s work”) will be deducted from compensation.

Tasks that are Generally Deducted from  Compensation

Generally, the determination of whether the amount will be deducted will depend on the complexity of the task and the circumstances of the particular estate.

If an estate trustee delegates any of his or her general duties to professionals, it is usually a personal expense for which he or she will not be compensated. Examples of this may include preparing the estate tax return, investing the estate assets, and preparing accounts.

Maintaining proper accounts is the primary duty of a trustee and the preparation of  accounts has generally been deducted from estate trustee compensation. If an estate trustee acted improperly, the fees to have accounts prepared will be deducted. While accounts are specialized and the argument has been made that an estate trustee may not have the requisite knowledge to prepare proper accounts, the preparation is still excluded from estate trustee compensation.

An estate trustee is not entitled to be compensated for legal fees paid for their own personal benefit; however, the case of Geffen v Goodman, 1991 2 SCR 353, established that an individual may be compensated for any legal fees incurred to defend the interests of the estate.

If an estate trustee’s actions resulted in a loss to the estate through mismanagement of the estate assets, the amount will likely be deducted from compensation. An example of mismanagement is if the estate trustee fails to prudently invest the estate assets.

Tasks that are Generally Not Deducted from Compensated

In Young Estate, 2012 ONSC 343, the court found that investment management was beyond the skill of an estate trustee, and it was proper to retain and pay private investment counsel out of the assets of the estate. An investment or financial manager may be necessary to hire and pay through estate assets if the expertise is reasonably outside the expertise of the average estate trustee.

An estate trustee can also hire consultants, investment managers, property managers or operating managers if an estate has a corporation as an asset, and can pay their fees out of the estate if it would not be reasonable to expect an estate trustee to have reasonable knowledge of the topic.

In summary, it bears repeating that whether an expense is deducted from compensation will depend on the particular circumstances of the estate and the particular expertise of an estate trustee.

Thanks for reading,

Ian M. Hull

Other Articles You May Be Interested In

Executor and Trustee Compensation

Taxation of Trustee Compensation

When Does an Attorney for Property Lose the Right to Claim Compensation?

22 Jul

Cases for Increasing and Decreasing Compensation – Hull on Estates and Succession Planning podcast #122

Hull & Hull LLP Hull on Estate and Succession Planning, Podcasts Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , 0 Comments

Listen to Cases for Increasing and Decreasing Compensation.

This week on Hull on Estates and Succession Planning, Ian and Suzana discuss cases for increasing and decreasing compensation.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

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