“What is the executor allowed to charge?” may be the single most common question in estate administration — and the most common source of family resentment. Ontario’s answer is more nuanced than the “5% rule” everyone quotes at the kitchen table. Here is how estate trustee compensation actually works, and how the courts keep it honest.
The legal starting point: “fair and reasonable”
Section 61 of Ontario’s Trustee Act entitles an estate trustee to a “fair and reasonable allowance” for their care, pains, trouble and time — nothing more specific than that. To give the phrase shape, courts developed a customary tariff: 2.5% of capital receipts, 2.5% of capital disbursements, 2.5% of revenue receipts and 2.5% of revenue disbursements, plus — in appropriate cases — a care-and-management fee of two-fifths of one percent (0.4%) per year of average asset value for prolonged administrations. On a simple estate that is fully collected and fully paid out, the arithmetic approaches the folkloric “5% of the estate.” On a $1.2 million estate, that would be roughly $60,000 — which is precisely why courts treat the tariff as a first approximation, not an entitlement.
The five-factor cross-check
Since Toronto General Trusts v. Central Ontario Railway (1905), affirmed by the Court of Appeal in Laing Estate (1998), the tariff result is tested against five factors: the size of the estate, the care and responsibility involved, the time actually spent, the skill and ability displayed, and the success of the administration. Where a large estate was administratively simple — one house, one bank account, three beneficiaries — courts routinely cut the tariff down. Passive market appreciation does not justify windfall compensation, and trustees who delegated the real work to paid professionals can expect their own allowance reduced accordingly. The standard of conduct is ordinary care and diligence, not perfection; but sloppy records are the fastest route to a reduced award.
No paying yourself as you go
A rule that surprises many first-time executors: compensation may not be “pre-taken” before it is authorized. Since Re Knoch (1982), taking fees before a court passing of accounts — or without the will’s express authorization or the unanimous consent of capable beneficiaries — is a breach of trust, and courts have ordered repayment with interest. The clean sequence is: administer, keep meticulous accounts, propose compensation, obtain releases from beneficiaries or pass the accounts, then take payment.
The court’s audit: passing of accounts
When beneficiaries won’t sign releases — or minors, incapable persons or charities are involved — the trustee applies to pass accounts under Rule 74.18. The accounts must follow court format: original assets, capital and revenue receipts and disbursements, investments, unrealized assets and the compensation claimed, all verified by affidavit. Beneficiaries may file objections on a set timetable before the hearing, and unopposed passings can be decided on paper. It is the estate world’s audit function, and its mere availability disciplines most compensation claims. Executor compensation is also taxable income — the estate must issue a T4 and remit withholdings — a detail that regularly ambushes DIY administrations at clearance-certificate time.
Professionals and ETDLs: hourly, transparent, court-approved
Professional fiduciaries — and especially Estate Trustees During Litigation — typically work differently: hourly rates proposed in writing before appointment, fixed in the court order, documented in itemized dockets, and approved on a passing of accounts. Market reference points: estates lawyers commonly bill around $400 per hour plus HST for this work (clerks near $225), while accountants, trust officers and other qualified professionals generally range from roughly $150 to $350 per hour. Note that an ETDL has no automatic right to the percentage tariff at all — compensation is in the court’s discretion, which is why a clear, proportionate fee proposal belongs in the appointing order. For modest estates, courts explicitly weigh whether a professional’s cost is proportionate to the assets being protected — transparency and restraint are what win these appointments.
Frequently asked questions
Is the executor automatically entitled to 5%?
No. The tariff is a guideline; the entitlement is only what is “fair and reasonable,” and courts adjust — usually downward for simple estates — using the five factors.
Can beneficiaries challenge the executor’s fee?
Yes — by declining to sign releases and requiring a passing of accounts, then filing objections. Courts reduce compensation for delay, poor records and over-delegation.
What if the will sets the compensation?
Then the will generally governs — s. 61(5) of the Trustee Act displaces the court’s discretion where the instrument fixes the allowance. Wills can also expressly authorize interim compensation.
Is executor compensation taxable?
Yes — as income from an office, with T4 and withholding obligations on the estate. A genuine bequest left in lieu of compensation is generally tax-free, but the CRA can recharacterize a “bequest” that is really payment for services.
How is an Estate Trustee During Litigation paid?
Usually hourly under a fee proposal embedded in the appointing order, payable from the estate, with no pre-taking and final court approval of the accounts. Percentage tariffs are the exception in ETDL practice, not the rule.
The bottom line
Ontario’s compensation regime rewards exactly two things: real work and clean records. Trustees who document their time, justify their decisions and wait for approval are almost always paid fairly. Trustees who reach for the folkloric 5% on a simple estate — or pay themselves early — hand beneficiaries the easiest complaint in estate litigation.
Gurpinder Gaheer, BA (Hons), MBA, is a dual-licensed real estate broker and mortgage broker serving families, estate trustees and their advisors across Ontario. His practice includes estate and probate property sales, estate financing solutions, and acting as a neutral professional in contested estate matters — with fee structures designed for court scrutiny: written proposals, itemized invoicing and strict separation between advisory and brokerage compensation. You can reach him through gaheer.com/.
This article is general information, not legal or tax advice. Compensation outcomes are fact-specific — always consult a qualified Ontario estates lawyer about your own situation.