May be named by the court if you don’t name one. Indeed, it is expected (and encouraged) that they will hire professionals and other advisors. Please contact us to arrange a meeting. Whether the Will says anything about compensation. 555 Legget Drive Estate trustees make many discretionary decisions. We also discovered from the letter that my brother took an executor fee of $20,000. As compensation for all the work and responsibility, executors (editorial note: we use the more informal ‘executor’ but the formal term in Ontario after probate with or without a will is ‘estate trustee’) are generally entitled to compensation. If you’re being considered as an executor of a will, we recommend getting legal advice before assuming the role, as it carries specific obligations under common and tax law. Co-Executors Share Fees. The entire estate, once settled, will be about $600,000. The Courts do not relish micro-managing these decisions, or reviewing them with 20-20 hindsight. these are set by the Provincial Courts. This fee should only be paid when a) the estate properly involved several years, and b) the executor did something to preserve, maintain, and invest the principal of the estate. In other words, the executor’s “income commission” is $360 ($6,000 * 6% = $360). f: 1 (866) 397-9227, Probate in Ontario For instance, a simple estate that has an easy to sell home worth $2M may very well not warrant $100,000 in executor compensation. You share your compensation among all estate trustees. Ottawa, ON K1G 3, e: info@ontario-probate.ca The size of the estate. t: 1 (888) 995-0075 0.4% per annum for ‘care and maintenance’ (often expressed as 2/5 of 1%). The benefit under the estate might be tax free. Executor’s Fees (compensation) Executor Fees: Executors can be compensated for the responsibility taken and the time and effort they put in to complete the estate process. + read full definition decision. The exception is if the estate is large enough to be subject to federal estate tax ($11.4 million in 2019). Executor’s Checklist The use of a specific bequest in the will by the testator to the executor, in lieu of executors fees, can often be successfully utilized in avoiding personal tax for compensation. It is possible for the testator (person making the will) and executor to agree on the level of compensation (or no compensation) at the time the will is made. For instance, it is common for the estate trustee to receive no compensation until the beneficiaries approve (or a Court passes) a set of accounts which include only a modest holdback while the estate trustee waits for a clearance certificate from CRA. Some estates are simple, and some are complex. Yes. Use this form to gain a rough understanding of the compensation that the estate trustee may be entitled to claim. The executor fee mandated by the Will is simply a 'fee for service' for executor services rendered. If there is no named executor, or the named executor is unwilling or unable to act, the common law sets out who can make decisions about making funeral arrangements. Ottawa, ON K1G 3, e: info@ontario-probate.ca An executor who does nothing is not entitled to a share of the total compensation equal to that of an executor who did all the work, simply because they were named on the Certificate of Appointment. It is a good idea to keep detailed time logs of work done. Canadian Probate Fee Calculator Probate fees (or estate administration tax) is calculated on the total value, in Canadian dollars, of a deceased person's estate. In this scenario, the capital receipt of the estate is the net amount released to the estate by the real estate lawyer, not the gross value of the property at death. For example, if an executor with a normal property hires folks to handle every aspect of preparing the property for sale before listing it, it is likely that the realtors fees would not be deducted from the executor’s compensation, but the cleaning company costs might. The estate trustee should declare the compensation on their tax return in the year received and pay income taxes on it accordingly. The estate executor has the authority to scrutinize and contest the attorney’s compensation. The care and maintenance fee should not be paid to reward a slow executor. Yes. Being an estate trustee is never simple and it can be very demanding and stressful. Executor’s Duties If the executor is a professional, for instance a trust company or a law firm, the income earned by the executor is treated as income from an office and is subject to HST. The probate process and its subsequent fees vary depending on the province where you live and hold assets. Appointing an outside party as executor can avoid “qualms among people for executor’s fees, for valuations or for distributions,” Carpio says. The latter approach is generally preferred by trust companies, as it promotes transparency and typically eliminates the need to seek court approval. A management fee is not always appropriate or allowed. The sharing should be in accordance with the contributions made. That fee will be listed somewhere in the 2016 or 2017 T3 trust tax return. Executor compensation is taxable income in the year it is received. Otherwise, the fee of $500 or more for acting as a trustee or executor is income from an office or employment which must be reported on a T4 slip which must also be issued by the trust or estate by the end of February. If the estate trustee is a professional, then unless they have a small practice the estate trustee should charge HST on their fees. To serve you, we have offices across Ottawa. If, for instance, the estate includes a home, and the executor hires a realtor and a real estate lawyer, and then as part of the sale all mortgages, debts or liens are discharged by the lawyer from the gross proceeds, and the net proceeds are turned over to the estate, then executor compensation should be claimed only on the net. In Ontario, the fee is 5% of the value of assets submitted for probate. 555 Legget Drive As the executor, you must report these fees on a T4 slip. Typically, the probate court will find executor compensation reasonable if it is in line with what people have received in the past as compensation in that area. Most likely, you'll report it on SCH C as self-employment income. How is the executor fee split between co-executors? If the estate trustee is a professional, then unless they have a small practice the estate trustee should charge HST on their fees. A fee paid to an executor is taxed as ordinary income, but a bequest given to a beneficiary isn’t taxable. If so, you might want to get tax advice regarding taking the executors' fee, because although I cannot give you any tax advice, executors' fees are taxable as … For more information, see "Employment by a trustee" in Chapter 1 of the T4001, Employers' Guide - Payroll Deductions and Remittances. Unless included in your business income, trustee, executor, or liquidator fees paid to you for acting as an executor is income from an office or employment. Mississauga, ON L4Z 1S1. © Copyright - Miltons IP - All Rights Reserved 2020, Home ownership: joint tenants and tenants in common, Beneficiary designations: TFSA, RRSP, RRIF, pension, insurance, Dependent support obligations and challenges, Wills and marriage, divorce & re-marriage, Retention, revocation and destruction of wills, Disputes about actions of an attorney for property, Estate administration / executor services. For example, the fee might be equal to 4 percent of the first $100,000 then decrease incrementally until it's just 1 percent of values over $9 million. I don't know exactly where that $500 in taxable income in your tax return should … An estate trustee should not casually acquiesce to extended free occupancy of a home. t: 1 (888) 995-0075 Our address for deliveries in  Mississauga is: Miltons Estates Law Executor fees in Ohio are set by statute: 4% of the first $100,000 of probate assets; 3% of the next $300,000; and 2% of the assets above $400,000. In Ontario, an executor is called an estate trustee. Executor compensation is taxable income in the year it is received. Use the value of the assets on the date of death (not some other date). You calculate this fee as 2/5 of 1% of the average value of the gross assets you administer. Executor compensation is ‘one fee for the job’, regardless of how many executors there are. © Copyright - Miltons IP - All Rights Reserved 2020, Home ownership: joint tenants and tenants in common, Beneficiary designations: TFSA, RRSP, RRIF, pension, insurance, Dependent support obligations and challenges, Wills and marriage, divorce & re-marriage, Retention, revocation and destruction of wills, Disputes about actions of an attorney for property, Estate administration / executor services. Ottawa, ON CANADA K2H 9G1, Kanata office: Executor’s Checklist Ottawa, ON CANADA K2H 9G1, Kanata office: This rule applies if, for example, you are an attorney or accountant and serve as an executor or estate administrator in the normal course of your business. CRA’s position is that the estate should secure an employer number, issue a T4, deduct taxes from the compensation and remit them directly to CRA, and to pay the employer’s portion of CPP. We can arrange to meet you at this address, or at an address across the GTA that suits you better. Compensation based just on percentages is a very blunt way to assess compensation, and it is possible that the Courts will be increasingly open to reducing executor compensation from the % baseline. Re: Deduction of expenses against executor fees This is in response to your email in which you asked us to confirm whether an executor who is not acting in the course of a business, is able to deduct out-of-pocket travel expenses incurred for the administration of … 200-15 Fitzgerald Road For example, if in the last year, executor fees were typically 1.5%, then 1.5% would be considered reasonable and 3% may be unreasonable. Put another way, the executor should not be claiming compensation for things the executor did not do – such as pay the realtor or discharge the mortgage or pay the lawyer, if these were done by the lawyer who (presumably) has been paid separately by the estate for doing this. The executor's fee is taxable as income. This income will generally be considered employment income and taxable to you in the year the fees are paid (even if the work was over several years). 15th Floor, 4 Robert Speck Parkway A sale by the estate trustee to a relative will always attract suspicion so and estate trustee who sells property to a relative or friend should be well prepared to justify the price and payment terms of the deal. If you are in the trade or business of being an executor, you report executor fees as self-employment income on Schedule C or Schedule C-EZ. The executor must file a Form 4768 by the due date for the filing of the Form 706-NA. Learn more about how executor compensation is calculated, supported, and challenged on this page. Note: all executor compensation is subject to Court supervision; the rate approved for large or simple estates may be lower than suggested by this calculator. My question is regarding the executor fee. Every Province and Territory in Canada has its own formula for calculating the probate fees payable. To serve you, we have offices across the Greater Toronto Area – Toronto, Scarborough, Markham and Mississauga. An issue can arise, however, if the estate trustee hires someone to perform ‘normal executor’s work’, and then claims compensation for this work. Suite 800, 1730 St. Laurent Blvd. Many people find these tasks challenging and difficult. Accordingly, a) estate trustees should keep good records that support the decisions that they made, and b) the mere fact that a beneficiary disagrees with a decision made by the estate trustee does not mean that it was wrong. Where the attorney and the executor are the same person, compensation should not be double-claimed for the value of the estate disbursed by the attorney and received by the executor. The executor named in a will has the legal responsibility for dealing with the body and arranging the funeral. Kanata, ON K2K 2X3, St. Laurent office: Being an estate trustee is hard work, and is a position of responsibility and trust. The gold standard is a properly-listed, properly-marketed sale to an arms-length third party for fair market value. We can arrange to meet you at this address, or at an address across the GTA that suits you better. Monies paid to you as the executor of the estate are taxable income to you. use this form to Estate Administration Tax payable on probate of an estate in Ontario. It requires considerable effort, careful attention to detail, tenacity, and a wide variety of tasks. Executor’s Duties Mississauga, ON L4Z 1S1. Estate trustees have a duty to maximize the recovery of the estate. Executor’s or administrator’s fee: Pay yourself your executor’s fee, which must be reasonable. Similarly, it is very seldom that an individual has a right to live in a house after the death of the owner rent-free for an extended time. Most occupants of property of a deceased owe reasonable occupancy rent to the estate, and the estate trustee should be vigilant about collecting occupancy rent (or, where the occupant is a beneficiary, deducting it from their share of the estate). In addition to regular taxes as determined by whatever tax bracket you fall in, you'll also pay an additional 15.3% self-employment tax if the amount you are paid is more than $400. The relevant factors to be considered in fixing executor compensation include: The 5% number is a very rough approximation. A common approach that the Courts use is to assess this properly calculated % figure with the subjective factors listed above. The executor is entitled to 6% of the $6,000 of income. Even if the executor receives a lump sum payment for the services rendered over several years, this income becomes taxable only in the year the executor … (As a result, some Wills expressly make a bequest to the estate trustee, rather than paying compensation). “Someone else [will] take care of it.” For those determined to name a beneficiary as executor, Carpio suggests drawing … For example, a California estate with a gross value of $1M would generate $23K in executor fees. Some states set the executor’s fee as a percentage of the estate’s value. That is why it is important, if the executor is also a beneficiary, to determine if it is wiser to waive the executor fee and receive the money as a benefit under the estate. Free eBook on Probate in Ontario. At 1.5%, Ontario has one of the highest probate rates while New Brunswick has one of the lowest at 0.5%. This would mean no income tax liability on the fee received. In addition to the income commission, the executor is entitled to a “corpus commission.” Corpus is a Latin word. Our address for deliveries in  Mississauga is: Miltons Estates Law Please contact us to arrange a meeting. This the estimated total amount of compensation that the executor will be entitled to charge after administration of the entire estate. To serve you, we have offices across the Greater Toronto Area – Toronto, Scarborough, Markham and Mississauga. Our mailing address and address for service is: Miltons Estates Law This can be done via a clause in the will, or by a separate compensation agreement that is “incorporated by reference” into the will. Mileage. California, as one example, allows 4% of the first $100,000 of the estate, 3% of the next $100,000, 2% of the next $800,000, and so on. You should understand the nature of the role. A power of attorney for property is often entitled to compensation, subject of course to the attorney providing proper accounts. Then again, a complex estate worth $250,000 might very well warrant more than $12,500 in compensation. The care and responsibility involved; the complexity of the estate. The proper % calculation is: A proper set of estate accounts should show all transactions, broken into the four receipts and disbursement categories noted above. Note that this often results in the estate trustee receiving one large lump sum payment which is taxable income in only one year. They are entitled to outsource some or all of the tasks. An estate trustee is not obliged to do everything themselves. Suite 304, Tower A Some Wills deal with this issue expressly. When you travel to the home of the will writer, as an example, to help maintain the home for sale, that is a reimbursable expense at the … In this article we’ll look at an executor’s responsibilities under the Income Tax Act. Family members or close friends may choose not to charge an executor fee. Compensation is Taxable. Enter the value of the estate that must be probated in Ontario. The receipt of a fee in exchange for your time and effort is earned income. Don’t let fees influence your executor Executor Someone you name to carry out the wishes that you set out in your will after your death. f: 1 (866) 397-9227, Probate in Ontario Select the Province/Territory, then enter the total value of the estate. If this is the case, the income tax rate of the … Attorney’s and accountant’s fees: For preparation of Form 706 and Form 1041, and for the probate accounting. The cost of this – both in terms of the payments, and the complexity of filling in the right forms – is real, and thus best done by someone with regular experience with the process. Executors and Income Tax. Nevertheless the income is taxable unless proper avoidance techniques are employed. Commission.€ Corpus is a good idea to keep detailed time logs of work done be compensated for the probate.... 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