CAN WE HELP YOU WITH AN ESTATE LAW DISPUTE IN ALBERTA
Have you recently taken on the role of executor to an estate? Are you the beneficiary of an estate who is worried about what your executor might be doing?
Both parties may be surprised to learn that in Alberta, and throughout the country, executors are allowed to receive payment from the estate for their services. Executing an estate is a time-consuming and difficult legal process. It’s a process that takes many steps to complete.
An executor must either have the skill to complete that process on their own or work with estates attorney to get all the way through it. Either way, executing an estate is a job, and it’s one that does deserve compensation.
What percentage does an executor get paid in Alberta?
The guidelines for how these fees may be paid is set out in the Alberta Surrogate Rules. These rules state:
“Personal representatives may receive fair and reasonable compensation for their responsibility in administering an estate by performing the personal representative’s duties. Compensation paid to a personal representative is for all the services performed by the personal representative to complete the administration of the estate, including distribution of the estate and the conclusion of any trusts.”
The Surrogate Rules go on to say that the personal representative may only receive compensation for the care and management of property in an estate if there is no outright distribution of that estate property at the date of death and the trust is not varied by agreement among the affected beneficiaries or by the court.
The Surrogate rules set up a schedule of guidelines.
In Alberta, fees are usually charged on the gross capital value of the estate. 3% to 5% may be charged on the first $250,000. 2% to 4% may be charged on the next $250,000. 0.5% to 3% may be charged on the balance. The total compensation will generally amount to roughly 5% of the entire value of the estate.
If the executor is actively managing the estate, then the executor may also charge fees on revenue received by the estate while those assets were being managed. They must be able to demonstrate this management. Passively waiting for a beneficiary to come of age before funds can be disbursed, for example, doesn’t count, whereas adjusting investments or managing properties with active, rent-paying tenants could. Note that most executors are expected to wrap up their involvement with the estate in one year unless there is some legitimate legal reason to extend the process.
See also: How Long Does an Executor Have to Settle an Estate in Alberta?
Executors often end up with duties far exceeding the administration of the estate. Executors have wound up running businesses held by the estate, have prepared tax returns for estates, and more. They may charge fees associated with these duties as well. The amount must be reasonable. While reasonable is a flexible standard, the courts do give some consideration to the skill level of the executor, as well as to how successful they were in performing these tasks.
If attorneys are involved the estate may also pay fees for direct and indirect legal services.
It is a good idea for executors to go over these fees with beneficiaries so they understand where the money is going. Executor fees are paid during the final stages of estate disbursement and distribution.
When an executor is appointed by the court they are known as an administrator. Administrators may also receive payment for the work they put in while managing an estate.
What expenses may an executor claim?
An executor may claim any expenses related to the administration of the estate, including:
- Fees for death certificate copies.
- Notarization fees.
- Travel costs associated with estate management.
- Filing fees.
- Legal fees.
Fees should be directly related to costs associated with managing the estate.
Does an executor have to show accounting to beneficiaries?
Yes. An executor does have to provide beneficiaries with an accounting of where all the monies of an estate went and why they went there. They should be able to provide receipts for those transactions.
This is generally done towards the end of the process, when the executor is close to disbursing funds. The executor may then ask the beneficiary to sign a release indemnifying them from personal liability. However, if the will provides for it, if all the beneficiaries agree to it, or if the court orders it, the personal representative or executor may be paid their compensation prior to completing the administration of the estate. If the administrator is overpaid in this fashion they will have to pay back the difference.
If beneficiaries do not agree with the accounting or believe there is a problem they can challenge the executor’s handling of the estate in court.
Are executor fees taxable in Alberta?
Yes. The CRA considers executor fees to be taxable income for the year in which payment was received. They’re a form of employment income.
Executor fees must be reported through a T4 filing.
Should estate planning address executor fees?
Yes. Executor fees will impact the value of an estate so your estate planning should absolutely address these costs and expenses. There are ways, for example, that you can make it easier and quicker for an executor to handle your estate, thus reducing the amount of fees and expenses associated with the process.
You can even at times manage these costs by outlining the proper amount of compensation in the will, though this will still need to be a reasonable amount and should roughly follow the schedules outlined by Alberta law.
Need help with an estate?
Our wills and estates attorneys have decades of experience. We can help you with any issue that might arise in regards to your loved one’s death. Please call (780) 474-7777 to schedule an appointment. We’ll help you protect your inheritance, and your loved one’s legacy.