Estate Trustee Compensation in Ontario: How the 5% Guideline Actually Works
Ontario estate trustees are commonly said to be entitled to five percent of the estate. That is a useful shorthand and it is not what the law says. Section 61 of the Trustee Act entitles a trustee to a fair and reasonable allowance for their care, pains and trouble, and the time expended, and it sets no formula at all. The five percent figure comes from a tariff Ontario courts developed to give that phrase a starting number, calculated across four separate streams rather than applied to the estate's value, and then cross-checked against five factors. Here is how the calculation actually runs, what it is applied to, and how compensation gets approved.
Where the Entitlement Comes From
Section 61(1) of the Trustee Act provides that a trustee, guardian, or personal representative is entitled to a fair and reasonable allowance for the care, pains and trouble, and the time expended in administering the estate, in such amount as a judge of the Superior Court of Justice may allow.
Two things follow from that wording. An estate trustee is entitled to be paid even where the will says nothing about compensation. And the statute fixes no rate, which is why the number has to come from somewhere else.
Where the will fixes compensation, section 61 does not apply at all. Subsection 61(5) provides that the section does not operate where compensation is fixed by the instrument creating the trust, so an estate trustee who accepts the role under a will specifying the fee has accepted that term. The qualifier matters: a clause that leaves the amount to be agreed, or that sends the question to a judge if a beneficiary objects, does not fix compensation, and section 61 continues to apply.
The Tariff: Four Streams, Not One Percentage
Over more than a century Ontario courts settled on a percentage tariff, described most usefully in Re Jeffery Estate in 1990. It is applied to what moves through the estate rather than to the estate's value:
2.5% of capital receipts. The assets the estate takes in.
2.5% of capital disbursements. The assets it pays out.
2.5% of revenue receipts. Income the estate earns during administration.
2.5% of revenue disbursements. Payments made out of that income.
Because most assets are both received and disbursed, the four streams together tend to land near five percent of the estate. That is where the shorthand comes from, and it is why the shorthand is misleading if you take it literally.
A Worked Example
Take an estate of $800,000 consisting of a house sold for $600,000, investments of $180,000, and $20,000 in bank accounts, which earns $8,000 of interest during administration and pays $3,000 of expenses from that income.
| Stream | Amount | Rate | Compensation |
|---|---|---|---|
| Capital receipts | $800,000 | 2.5% | $20,000 |
| Capital disbursements | $800,000 | 2.5% | $20,000 |
| Revenue receipts | $8,000 | 2.5% | $200 |
| Revenue disbursements | $3,000 | 2.5% | $75 |
| Tariff total | $40,275 |
That figure is a starting point rather than an entitlement. It is what a court would test, not what a court would necessarily approve.
What the Base Actually Includes
Only property that passes through the estate counts.
Assets held jointly with a right of survivorship, and registered plans or insurance policies with a named beneficiary, go directly to the survivor or the beneficiary. They never come under the estate trustee's control, so they generate no compensation. This surprises trustees of estates where most of the wealth moved outside the will, and it is the reason a compensation figure and a probate tax figure can look very different for the same family.
The five percent is also not annual. It is compensation for administering the estate, not a yearly fee. An estate that takes two years does not generate ten percent.
The Care and Management Fee
There is a separate allowance, sometimes claimed on estates that stay open for years, of two-fifths of one percent per year on the average annual value of the assets under management.
It is not routine and it is not automatic. Ontario courts have made clear that special circumstances are required, and that ordinary care and investment of estate funds during the executor's year does not by itself justify it. It belongs to genuine ongoing management, such as a trust running for several years, rather than to an administration that simply took a long time.
The Five Factors
Running the tariff produces a number. A court then asks whether that number is fair, using five factors drawn from Toronto General Trusts Corp. v. Central Ontario Railway, decided in 1905 and still the governing list:
The size of the estate. Large does not automatically mean complex, and a modest estate can be far more demanding than a large one.
The care and responsibility involved. What was actually at stake in the decisions the trustee had to make.
The time occupied. Hours genuinely spent, which is why contemporaneous records matter.
The skill and ability displayed. Whether the role called for judgment beyond the ordinary.
The success of the administration. What the trustee's work actually achieved for the estate.
The cross-check runs both ways. It can support a claim above the tariff on a demanding estate, and it can reduce a claim on an estate where the tariff produces a windfall for straightforward work. A $3,000,000 estate consisting of one house and two accounts is the classic case for a reduction.
How Compensation Gets Approved
There are three routes, in ascending order of cost.
The will fixes it. Where a compensation clause exists, it usually governs, and there is nothing to negotiate.
The beneficiaries agree. The most common and by far the cheapest route. The estate trustee presents the accounts and the proposed compensation, and the beneficiaries approve it and sign releases. Raising the subject early, in writing, with the calculation shown, is what makes this work.
The court fixes it on a passing of accounts. Where agreement is not reached, the estate trustee applies to have the accounts formally passed and the compensation fixed by a judge. The Rules of Civil Procedure allow an application for exactly this purpose. It is thorough and it is expensive. Costs are in the court's discretion: they are often paid from the estate, but a judge can order them personally against a party whose conduct made the exercise necessary.
The order matters. Taking compensation before it has been approved, by either route, is one of the more reliable ways to turn a cooperative beneficiary into a litigious one.
Where This Goes Wrong
Paying yourself as you go. Compensation is taken at the end, from accounts that have been presented. Drawing it in instalments during the administration, however reasonable the amounts, reads as helping yourself.
No time records. Three of the five factors turn on what you actually did. A trustee who cannot evidence the time and the decisions is arguing from memory against a beneficiary with a calculator. Keeping records from the outset is one of the basics covered in our executor checklist.
Treating the tariff as an entitlement. It is a starting point that courts adjust in both directions.
Ignoring the tax. Compensation is taxable income to the person receiving it, and it is treated differently from an inheritance. Where the estate trustee is also a beneficiary, the choice between taking compensation and taking a larger share of the residue has real consequences. Our guide on tax on executor fees in Ontario covers that side in detail.
Frequently Asked Questions
How much does an executor get paid in Ontario?
There is no fixed rate. Section 61 of the Trustee Act entitles an estate trustee to fair and reasonable compensation, and Ontario courts apply a tariff of 2.5% on each of capital receipts, capital disbursements, revenue receipts, and revenue disbursements, which usually totals close to 5% of the estate. That figure is then adjusted up or down against five factors.
Is executor compensation 5% every year?
No. It is compensation for administering the estate, not an annual fee, so an administration that takes two years does not produce ten percent. A separate care and management allowance of two-fifths of one percent a year can apply to estates that require genuine ongoing management, but it requires special circumstances and is not routinely granted.
Do joint assets count toward executor compensation?
No. Only property that passes through the estate is included. Jointly held assets with a right of survivorship, and registered plans or insurance with a named beneficiary, go directly to the survivor or beneficiary and never come under the estate trustee's control.
Can beneficiaries challenge executor compensation?
Yes. Where beneficiaries do not approve the compensation, the matter is resolved on a passing of accounts, and a judge fixes the amount after reviewing the accounts against the five factors. Courts do reduce claims that the tariff has inflated relative to the work done.
Is executor compensation taxable in Ontario?
Yes. It is income to the person who receives it, and it is treated differently from an inheritance, which is not taxed in the recipient's hands. Where the estate trustee is also a beneficiary, this affects whether taking compensation is the better outcome.
Can an executor waive compensation?
Yes, and family trustees often do, particularly where they are also the residual beneficiary and the money would arrive in their hands either way with a worse tax result. Confirm the position in writing so it does not become a dispute later.
If you are calculating your own compensation, or you have been presented with a figure you cannot make sense of, the numbers behind it are usually the whole argument. Book a free call and we will work through the calculation with you.
This article provides general information about Ontario law and is not legal advice. Speak with a lawyer about your specific circumstances.
