Executor Compensation in Canada — How Much It Pays and Who Decides

Being named executor of a $1.5 million estate sounds like an honour. Two years in, it can feel like an unpaid second job — assembling asset inventories, chasing institutions, dealing with siblings who disagree about the cottage, learning the tax-return software, writing cheques out of an estate account the executor pays into out of pocket and waits to be reimbursed from. Provincial trustee legislation responds to this by giving executors the right to compensation — usually around 5% of the estate, sometimes less, occasionally more if the work justifies it.

This guide walks the Canadian framework: the Ontario "Five Percent Rule" under section 61 of the Trustee Act,^[1] BC's 5% cap under section 88,^[2] Alberta's more discretionary approach,^[3] and the practical mechanics — when the executor gets paid, who has to agree, whether the compensation is taxable income, and the patterns that lead to a passing-of-accounts dispute over the fee.

The 5% benchmark, in plain numbers #

A $1 million Canadian estate with no unusual complications generates roughly:

• Capital receipts: $1 million × 2.5% = $25,000^[1]
• Capital disbursements: $1 million × 2.5% = $25,000^[1]
• Revenue receipts (interest, dividends earned during administration): ~$20,000 × 2.5% = $500^[1]
• Revenue disbursements: ~$20,000 × 2.5% = $500^[1]
• Care-and-management fee (0.4% × $1 million × 1 year of administration): $4,000^[1]
• Total: approximately $55,000^[1]

On a $500,000 estate, the same framework produces roughly $27,500.^[1] On a $5 million estate, roughly $275,000.^[1] The numbers scale with the value of property handled, not with the work involved — which is the source of the most common dispute between executors and beneficiaries.

Ontario — the Five Percent Rule under section 61 of the Trustee Act #

Ontario courts apply a benchmark approach under section 61 of the Trustee Act.^[1] The formula is:

The starting position is roughly 5% of the gross value when capital comes in and goes out once, plus the small annual fee on long-running estates.^[1]

Ontario courts treat the percentages as benchmarks rather than entitlements.^[1] The actual figure must be "fair and reasonable" for the work performed. The leading principles (from a line of cases interpreting section 61) consider the size of the estate, the complexity of issues handled, the time and skill applied, the value of property managed, the success achieved, and the disposition pattern. A simple $2 million estate of GICs and one rental property does not justify the same fee as a complex $2 million estate with contested family dynamics, multi-jurisdictional assets, and active business interests.

BC — section 88 of the Trustee Act and the 5% cap #

BC's Trustee Act, RSBC 1996, c 464, section 88 sets a 5% maximum on the gross aggregate value of the estate.^[2] The statutory language frames the allowance as "fair and reasonable" for the "care, pains, and trouble, and time expended in or about the estate."

BC practice typically lands the figure between 2% and 5% of gross value depending on complexity.^[2] The court considers the same factors as Ontario — size, complexity, time, skill, results — though BC courts draw on the same five-factor framework (traced to Toronto General Trusts Corp v. Central Ontario Railway and refined in subsequent decisions) with its own colour. An additional care-and-management fee of up to 0.4% annually can be claimed where administration extends over multiple years.^[2]

Approval is required before payment in BC. The standard practice is to either obtain written consent from all beneficiaries or apply to the BC Supreme Court on a passing of accounts.

Alberta — discretionary, anchored by the Surrogate Rules #

Alberta takes a more discretionary approach. Compensation is set by:

1. A directive in the will, where the testator has specified an amount or formula.
2. Consent of all beneficiaries, where the executor and beneficiaries agree on a figure.
3. A court order on a passing of accounts, where the executor and beneficiaries cannot agree.

The Surrogate Rules guide the court's analysis based on the complexity and extent of the executor's work, the time involved, problems encountered, the value of the estate, and the executor's skill and specialized knowledge.^[3] Alberta court-approved compensation commonly falls in the 1% to 5% range, with the higher end reserved for complex estates with active management requirements.^[3]

Other provinces — the broad picture #

The pattern across the remaining common-law provinces is similar — a "fair and reasonable" standard, with percentages used as benchmarks rather than entitlements:

Quebec, as a civil-law jurisdiction, uses a different framework for liquidator remuneration and is not covered in depth here.

Tax treatment of executor compensation #

A pattern catches family executors off-guard. Executor fees are treated as income from employment under section 5 of the Income Tax Act.^[4] Practical consequences:

• The estate must issue a T4 slip to the executor for the year in which the compensation is paid.
• Income tax and CPP contributions must be withheld at source by the estate.
• The executor reports the income on their personal T1 return at marginal rates.

A common workaround in family executor situations: where the executor is also a beneficiary, the family agrees that the executor takes a slightly larger share of the inheritance (which flows tax-free to the recipient) in lieu of taxable fees. The arrangement requires the agreement of all beneficiaries and clean documentation, but it can save the executor several thousand dollars in personal tax. It is not a tax dodge — the CRA permits family arrangements of this type — but it does require deliberate planning.

When compensation becomes a dispute #

Executors and beneficiaries most commonly disagree about compensation in three patterns:

Executor self-sets without consent. The executor takes compensation from the estate before final accounting, calculated by their own application of the provincial percentages. Beneficiaries object on the passing of accounts. The court reviews the figure against the actual work performed.

Estate is large, work was simple. A $5 million estate of mutual funds and a paid-off home generates a benchmark fee around $250,000 under a strict 5% application.^[1] If the executor's actual work was a few weeks of paperwork, the court will commonly reduce the figure substantially — sometimes to a fraction of the percentage benchmark.

Estate is small, work was extensive. The reverse pattern. A $200,000 estate that took two years to settle through contested family dynamics, foreign-asset complications, and a missing original will may justify well above the 5% benchmark — though the absolute dollar figure is still modest.

The path that avoids the dispute, where it's available, is proposing the compensation figure in the final accounting and obtaining written consent from each adult beneficiary before payment. The court process exists for cases where consent cannot be obtained.

A pattern worth flagging — pricing the work, not the assets #

Across all provinces, the underlying principle is that compensation rewards the executor's labour, skill, and risk, not the size of the assets they happen to be administering. A modest estate that ran cleanly does not necessarily justify the same fee as a complex estate of equal value. The percentages are anchors; the work is the substance.

That principle is why fully discounted executor fees on simple estates and elevated fees on genuinely complex estates both clear the "fair and reasonable" test. The benchmark is the starting point; the work justifies the variation.

What we focus on at It's Simple Will #

Our will questionnaire lets the testator either specify an executor compensation amount or formula in the will itself, or leave the figure to the default provincial framework. Specifying an amount can prevent later disputes and gives the executor certainty about what they will be paid. The trade-off is that the figure becomes fixed, which can feel high if the work turns out to be simple or low if the work turns out to be complex.

For broader context, our pillar on what an executor actually does walks the work itself, and our executor checklist lists the tasks in execution order.