The executor of your estate is responsible for making sure the wishes documented in your will come true. They act on your behalf to manage your assets, settle your estate, and communicate with your loved ones and beneficiaries after you pass away.
It’s a tough job, which is why executor compensation is important. While many executors take on their role out of loyalty or duty, they can also be entitled to compensation for their time, effort, and responsibilities.
Whether you're planning your will right now or have been named as an executor yourself, it’s important to understand the rules around executor compensation and the legal fees involved in estate planning.
In this article, we’ll answer common questions about executor fees in Canada, how compensation varies by province, and the importance of specifying executor compensation in your will.
Are executors entitled to compensation in Canada?
Yes, executors are entitled to compensation unless the will specifies otherwise.
This is because serving as an executor can be a big responsibility and can take months or years. It involves handling financial matters, ensuring that all debts are paid, distributing assets to beneficiaries, and documenting their work.
If you’ve been named as an executor and the will doesn’t mention compensation, each province sets out a method of determining the amount of compensation.
Factors that influence executor compensation
The compensation you’re entitled to as an executor is influenced by several factors, such as:
- Size and complexity of the estate: The larger and more complex the estate, the more work it involves. Managing an estate with multiple properties, investments, or complex assets can require significantly more effort than a smaller estate. This is why many provinces set executor compensation as directly proportional to the value of the estate they’re managing.
- Responsibilities carried out: As an executor, you’re tasked with estate settlement duties like collecting and managing the estate’s assets, paying off debts and taxes, and ensuring proper distribution of assets to beneficiaries. The more tasks you have to handle personally (without hiring professionals), the higher your compensation may be.
- Professional services paid by the executor: You can hire professionals, such as accountants, lawyers, or appraisers, to help manage the estate. The cost of these services is covered by the estate, which means it can reduce the executor’s compensation you’d otherwise be entitled to by working alone.
- Time spent on executor duties: Executor fees are often proportional to the time spent managing the estate. If you spend months or years as an executor, handling complex legal or financial matters, you may be entitled to more compensation.
How does executor compensation vary by province?
While executor compensation is allowed across all provinces, the amount isn’t standardized.
Most provinces in Canada allow executors to receive fair compensation, and some have formulas to help with this.
Specifying executor compensation in your will
Do you need to specify executor compensation in your will?
Setting an executor’s compensation in your will isn’t required. However, it does give you more control over the costs of your estate and how your assets are distributed. It can also prevent misunderstandings or disputes among beneficiaries and family members.
By clearly outlining the amount or percentage your executor will receive, you ensure that the process runs smoothly and reflects your wishes.
Leaving compensation unspecified may lead to confusion or legal challenges if beneficiaries feel the compensation requested is too high compared to provincial guidelines. If this becomes the case, the executor and other relevant parties may need to go to court to settle or investigate challenges.
What if you want your executor to get more (or less) than the provincial formula?
You may want to reward your executor with more than the provincial formula dictates. This is perfectly legal.
Alternatively, you might prefer for your executor to take on the role without compensation, especially if they are a close family member or will already receive an inheritance as a beneficiary of your estate. This is also possible, but you must explicitly state it in your will. Otherwise, the executor can still claim the standard provincial compensation.
What happens if you don’t specify compensation in your will?
If you don’t specify compensation, the provincial formula or guidelines for executor compensation will apply automatically.
Whether your province has a formula for compensation or not, the executor will submit their compensation request to the beneficiaries of the estate for approval once they’ve completed their duties.
If the beneficiaries approve, the executor will receive their compensation from the estate. If the beneficiaries do not approve, the executor will either renegotiate their compensation or request the issue to be taken to court.
Can an executor refuse compensation?
Yes, an executor can formally decline compensation, especially if they are a close family member who prefers to help settle the estate without payment. It’s also common to refuse compensation if the executor is also a beneficiary receiving an inheritance from the estate.
Are executor fees taxable in Canada?
Yes, executor compensation is considered income and must be reported on the executor’s tax return.
For avoiding tax on executor fees, you should discuss with your executor whether they want to receive compensation or not. If they don’t want compensation, you don’t have to worry about tax. If they do, you can ask if they would consider receiving assets as a beneficiary instead, since there is no inheritance tax in Canada.
Can the beneficiaries dispute the executor's compensation?
Beneficiaries have the right to dispute compensation if they feel it’s unreasonable, which may lead to court involvement if the executor and beneficiaries cannot find a way to settle on compensation.
In this case, a judge will assess whether the compensation is fair based on legal provincial guidelines.
Can a professional executor charge more than the standard formula?
Yes, professional executors like lawyers or trust companies may charge higher fees than a layperson because of their professional expertise and ability to potentially settle the estate more efficiently. This is usually agreed upon in advance and outlined in the will.
What happens if there are multiple executors?
If there are multiple executors, they will generally share the compensation.
Some provincial guidelines state that compensation does not need to be divided equally among multiple executors, especially if the distribution of work is not equal between them. As such, compensation would be divided on a case-by-case basis.
The importance of a well-prepared will
Ensuring that your will is up to date and includes details like executor compensation is essential for avoiding future conflict. Willful makes this process simple by offering a legally binding online will that you can create from the comfort of your home.
While you can’t specify compensation in your Willful will at this time, you can appoint an executor, designate beneficiaries, name guardians, set up a testamentary trust, and more—all in less than 20 minutes.
Plus, with unlimited free updates for life, you can adjust your will as your estate or choice of executor changes, ensuring your wishes are always accurately reflected.
Get your own will today
Executor compensation is a key consideration in estate planning, but many Canadians haven’t yet tackled the first step of starting their will.
By understanding how compensation is determined across provinces and clearly specifying it in your will, you now have more knowledge on how you can make your will and avoid future conflicts with your choice of executor and beneficiaries.
With Willful, you can easily prepare a legally binding will and make free unlimited updates for life—all from the comfort of your home.
