Beneficiary Disputes $400,000 Fee to Administer a BC Estate

The personal representative tasked with distributing and managing a deceased person’s estate is entitled to be paid for services rendered. Fees claimed by the personal representative can be challenged by the estate beneficiaries. If the parties are unable to come to an agreement, a Court application will be necessary. In today’s post, we will examine how the Court determines fair and reasonable executor’s remuneration.

What does “personal representative” mean in BC estate law?

First, a note on terminology. In BC, the term “personal representative” can refer to an Administrator or an Executor:

• If a person dies with a Will, then the Will appoints an “Executor” to administer that person’s estate.
• If a person dies without a Will, then a spouse, child, family member, or third party can apply to the probate court to be appointed the “Administrator” of that person’s estate.

For example, in Chau Estate (Re), 2016 BCSC 2541, Mr. Chau died without a Will in 2007. He did not have children but was survived by his three siblings. All three siblings were equal heirs to Mr. Chau’s multi-million-dollar estate. None of the three beneficiaries offered to act as Administrator. Out of a sense of obligation and loyalty, Mr. Chau’s nephew, David, stepped up on behalf of his family and was appointed Administrator of Mr. Chau’s estate in 2013. A few years later, David sought interim remuneration of over $400,000 for his work and time spent to date. One of the beneficiaries challenged the amount claimed, arguing that $60,000 would be generous. District Registrar Nielsen reviewed the applicable legal principles and fixed the Administrator’s fee at $150,000 for the period in question.

How are BC executor’s fees determined?

If the deceased’s Will does not specifically outline the executor’s fee, or if the deceased died without a Will as in Chau Estate (Re), then section 88 of BC’s Trustee Act governs remuneration. The personal representative is entitled to be paid:

• A fair and reasonable allowance, not exceeding a maximum of 5% of the gross aggregate value, including capital and income, of all the assets of the estate at the date of the passing; and
• An annual fee which must not exceed 0.4% of the average market value of the estate assets for annual care and management of the estate.

As our BC estate litigation team previously discussed, the percentages in s. 88 of the Trustee Act are a rough guide to assist in determining a BC executor’s fee. Remuneration is determined on a quantum meruit basis, which is the reasonable value of the services rendered, subject to the 5% ceiling. Also, as the result in Chau Estate demonstrates, remuneration does not need to be fixed as a percentage of the gross aggregate value of the estate; instead, it may be calculated as a lump sum, provided it does not exceed 5% ceiling.

Criteria to be considered in determining fair BC executor’s fees

In its assessment, the Court must be satisfied that the executor’s remuneration bears a reasonable relationship to the work and responsibility undertaken. Various criteria are to be considered when determining whether the administrator or executor’s fee as claimed is “fair and reasonable” including, but not limited to:

1.            the magnitude of the estate,

2.            the care and responsibility involved,

3.            the time occupied in administering the estate,

4.            the skill and ability displayed, and

5.            the success (or lack thereof) achieved in the administration.

Applying the criteria set out above, the Court noted that the magnitude of Mr. Chau’s estate was considerable, with a value of $13,407,728 as of date of death. The estate’s value increased to over $16,000,000 by the end of the accounting period. However, the majority of the estate’s assets were passive investments which simply did not require the Administrator’s constant attention. Mr. Chau’s estate consisted of a half interest in a house on West 22^nd Street in Vancouver, BC, his personal effects, jewellery, money in the Royal Bank of Canada, GICs in the Royal Bank of Canada, a car, the contents of a safety deposit box, and some TD shares. The increase in value of the estate was due to BC’s booming housing market, not any particular skill deployed by the Administrator. While the Administrator was given credit for handling issues when they arose, such as dealing with estate taxes owing to the CRA, it was also noted that he (properly) hired lawyers and accountants to assist him with organizing the estate to the point where it should be ready for distribution. The bank handled the GICs. Mr. Chau’s sister co-owned and lived in the West 22^nd Street home, so she took care of management of the property. In the Court’s view, the amount claimed by the Administrator was excessive in all the circumstances.  Fees were assessed on a quantum meruit basis in the lump sum of $150,000 for the time period involved in the passing of accounts. Both the Administrator and the beneficiary had their costs assessed at special costs.

Bottom line on BC administrator/BC executor’s fees

If the beneficiaries challenge compensation claimed and the parties cannot agree, disputes over administrator/executor’s fees will have to be settled by the Court, applying the legal principles and criteria discussed above.