Tag: percentage approach
When is it appropriate for a court to reduce estate trustee compensation? The Supreme Court of Nova Scotia addressed this issue in Atlantic Jewish Foundation v Leventhal Estate (“AJF”).
Before getting into the AJF decision, it is worthwhile to include the caveat that determination of estate trustee compensation in Ontario (a summary of which can be found in my paper here) differs somewhat as compared to Nova Scotia. Nonetheless, both provinces use 5% of the value of the estate, subject to the discretion of the court, as the starting point in determining the quantum of compensation. As such, AJF remains informative in Ontario.
The deceased left a Will naming his friend, who was also a lawyer, as his Estate Trustee. AJF was named as the residuary beneficiary. The Will was silent as to estate trustee compensation. As the estate was valued at over $15 million, the Estate Trustee sought compensation in the approximate amount of $896,000, being 5% of the gross adjusted value of the estate. AJF maintained that the amount was excessive and proposed compensation in the amount of $300,000.
In determining how much compensation the Estate Trustee should be entitled to, and applying an approach similar to Ontario’s ‘five factors’, the court made the following observations: the level of responsibility is often greater for higher value estates; the increasing level of responsibility does not necessarily rise in direct proportion to the size of the estate; the Estate Trustee arranged and supervised the funeral and burial, which was mainly handled by telephone; the Estate Trustee acted promptly in selling the house; many of the assets were already in the form of cash, and the Estate Trustee knew the banks the deceased used; the Estate Trustee was diligent, wise and prudent and had to be a hands-on executor; the Estate Trustee made no mistakes; a large part of the estate was made up of investments that were readily converted into cash for distribution; and, the estate was larger rather than complex.
The court noted that 5% should be reserved for estates where there are complicating features that require more than wise and careful planning to maximize the value of the estate. Therefore, the court awarded compensation in the amount of $450,000, being slightly more than 50% of the maximum amount that could be awarded. A larger amount of compensation would have the effect of reading into the Will a bequest to the Estate Trustee that the deceased did not intend to make.
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