When it comes to administering an estate in British Columbia, understanding executor fees is crucial. Executors play a pivotal role in the settlement of an estate, but it’s essential to know how much they can charge for their services. In this article, we will delve into the specifics of executor fees in BC and the significance of probate lawyers.
How Much Can Executors Charge in BC?
An executor, also known as a personal representative, is an individual appointed to manage and distribute the assets of a deceased person’s estate. In BC, the executor is entitled to a fee for their services one of two ways: either specified in the will, or if the will is silent, by the Trustee Act of BC.
Executor’s fee given in a will:
A will provides the testator (in BC called the “will-maker”) with the flexibility to specify how the executor’s fee should be determined. This can be done by either designating a percentage of the estate’s total value as of the date of death or by specifying a fixed dollar amount. When a percentage is assigned, the executor’s fee is calculated based on the gross aggregate value of the estate, including both capital and income. For instance, a testator may choose to allocate 3% of the estate’s total value as the executor’s remuneration. Alternatively, a will can establish a specific dollar amount that the executor will receive for their services. This approach allows for a more precise determination of the executor’s fee, irrespective of the estate’s value. The wills lawyers from Westcoast Wills & Estates can fix this specific dollar amount to inflation. The choice between a percentage-based or fixed-dollar executor fee often depends on the testator’s preferences, the complexity of the estate, and the number of beneficiaries involved.
Executor fees when there is no fee specified in a will
When there is no executor’s fee specified in a will, the default law applies. According to the Trustee Act of BC, Section 88, this fee is to be calculated as “a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, including capital and income, of all the assets of the estate by way of remuneration for his or her care, pains and trouble and his or her time spent in and about the… executorship.”
This means that executors are entitled to compensation for their efforts in managing and distributing the assets of the estate. The executor fee, which should not exceed 5% of the total estate value, is meant to reflect the work and time invested by the executor in fulfilling their responsibilities. The specifics of how this fee is calculated can vary, but it should always be reasonable and justifiable, considering the unique circumstances of the estate. Executors must ensure that the fee they charge aligns with the guidelines set forth in the Trustee Act of BC, Section 88, which emphasizes fairness and reasonableness in determining the remuneration for their services.
Are executor fees taxable?
Yes, the role of executor is a job, and therefore executor fees are taxable as personal income to the executor. Some estate planning lawyers try to get around this by giving the executor a non-taxable gift (bequest) in the will in lieu of executors fees. There are two potential problems with this technique:
- The executor may renounce, and still keep the gift (thank you very much!); and
- The CRA could reassess the gift as an executor fee anyways.
Discuss Executor Fees with a Probate Lawyer
Probate lawyers play a vital role in the estate administration process, especially when dealing with estates that require a grant of probate. Probate is the legal process of validating a will and obtaining court approval to distribute the deceased’s assets. Probate lawyers assist executors and beneficiaries by providing guidance on the legal steps required, preparing the necessary documents, and representing their interests in court.
Probate lawyers and wills lawyers are instrumental in helping will-makers and executors determine what the executor’s fee should be. They provide expert guidance to ensure that the process is handled correctly and efficiently.
In British Columbia, understanding how much executors can charge is essential when administering an estate. Executor fees can be calculated in various ways. Probate lawyers and estate lawyers are valuable partners in this process, helping both will-makers and executors navigate the legal intricacies of determining an appropriate executor fee. By seeking professional guidance, executors can ensure that their responsibilities are fulfilled accurately and that the estate is settled in accordance with the law.