There is no question that taking on the task of a Personal Representative is time-consuming and can be emotionally charged, depending on the complexity of an Estate and the personalities you are dealing with. Whether you can pay yourself as a Personal Representative depends on a number of factors and is partially governed by Schedule 1, Part 1 – Personal Representatives’ Compensation of the Surrogate Court Rules of the Alberta Rules of Court.
The Surrogate Court Rules state that “Personal Representatives may receive fair and reasonable compensation for their responsibility in administering an estate by performing the Personal Representatives’ duties…” and “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”.
If the deceased had a Will, review the Will to determine if it states that you can pay yourself a fee. Does it state a specific amount or does it simply state that you can pay yourself “a fee” or “a reasonable fee”? If it states that you can pay yourself a specific amount, then you are only allowed that amount, regardless of the complexity of the Estate. If the Will states that you are entitled to “a fee” or “a reasonable fee” or wording along those lines, then you may charge for your services, but you must obtain the consent of the beneficiaries in doing so.
There a number of factors that go into determining what can be charged as a “reasonable fee” and they include the following:
- the gross value of the Estate (before all debts and expenses incurred)
- money generated and paid into the Estate after the deceased’s passing (i.e. real estate investments, corporate dividend payments, etc.) and the disbursements incurred by you in carrying out your duties (i.e., accountant fees, legal/paralegal fees, etc.)
- the complexity of the work involved and whether any difficult or unusual matters arose in the administration of the estate (locating missing beneficiaries);
- the amount of skill, labour, responsibility, technological support, care and specialized knowledge is required (i.e., selling investment properties, winding up businesses, etc.);
- the time expended;
- the number and tasks delegated to others (accountants, realtors, paralegal/legal); and
- the number of Personal Representatives appointed.
In a case where the Estate may be bankrupt, in other words, when the debts outweigh the assets, the fees of a Personal Representative take precedence over all other debts, with the exception of funeral and what are called “testamentary” expenses (payment to accountants for filing tax returns for the deceased and the Estate, payment to paralegals/lawyers for obtaining a Grant of Probate/Grant of Administration, realtor fees, etc.).
The suggested fee guidelines for a Personal Representative are “suggested guidelines only” and were determined by the Surrogate Rules Committee in 1995. They are as follows:
1. Fees may be charged on the gross value of the Estate as follows:
(a) 3% to 5% on the first $250,000.00 of the Estate;
(b) 2% to 4% on the next $250,000.00 of the Estate; and
(c) 0.5% to 3% on the remainder of the Estate.
2. Fees may be charged on any revenue received by the Estate during the administration (i.e., dividend payments from shares held by the deceased);
3. In the event you are tasked with caring for and managing trust accounts (i.e. if the beneficiary is under age or only administered their entitlement through a trust), you may charge for “care and management fees”. This occurs when there is no distribution at the date of death and if the beneficiaries are agreeable to leaving the trust in place; and
4. Additional compensation for those tasks which are required to perform additional roles such as director/management roles for the deceased’s business or corporation, extremely unusual or difficult circumstances, or instructing in the event of litigation occurring.
When a fee is not specifically stated in the Will, it is very important that you obtain the consent of the beneficiaries for your suggested fee before paying yourself. If you do not, you may face litigation and personal liability for return of the fee, or a portion thereof, plus interest should the Court determine that you charged an excessive fee.
Finally of import, any fees received by a Personal Representative (fees only, not reimbursement for expenses) are considered to be income by Revenue Canada and must be included as income in your personal taxes.