Understanding Executor Compensation in Ontario: The "5% Rule" and Beyond
- Shannon Williams
- Apr 28
- 3 min read
Serving as an executor is often described as a "labour of love," but in Ontario, the law recognizes that it is also a significant professional responsibility. Under the Trustee Act, executors (formally known as Estate Trustees) are entitled to a "fair and reasonable allowance" for their time and effort.
However, many family executors are surprised to find that compensation isn't an automatic flat fee. Here is what you need to know about how compensation is calculated and managed in 2026.
The Guideline: The "5% Rule"
While the Trustee Act doesn't set a specific percentage, Ontario courts typically use a 5% guideline as a benchmark for "fair and reasonable" compensation. This is generally broken down into four categories:
Category | Typical Calculation |
Capital Receipts | 2.5% of the total value of assets gathered (bank accounts, home sale, etc.) |
Capital Disbursements | 2.5% of the total value of assets distributed to beneficiaries |
Revenue Receipts | 2.5% of income earned by the estate during administration (interest, rent) |
Revenue Disbursements | 2.5% of income paid out (property taxes, utility bills) |
In addition to these percentages, an executor may occasionally claim a Care and Management Fee (typically 0.4% annually) if they are managing complex assets over a long period, such as a multi-year trust.
The Five-Factor Test
The "5% Rule" is only a starting point. If the compensation is challenged by beneficiaries or reviewed by a judge during a Passing of Accounts, the court applies a five-factor test to see if the amount is truly earned:
The size of the estate: Larger estates don't always mean more work, so a flat 5% might be reduced if the assets were simple to transfer.
The care and responsibility involved: Did the executor have to manage a business or handle complex litigation?
The time occupied: How many hours were actually spent on estate business?
The skill and ability displayed: Did the executor provide specialized knowledge that saved the estate money?
The success achieved: Was the estate settled efficiently and without unnecessary conflict?
Important Tax Considerations for Executor's Compensation
It is vital to remember that executor compensation is considered taxable income.
For Individuals: If you are a friend or family member, the compensation is viewed as employment income. The estate must withhold income tax and CPP, and issue you a T4 slip.
For Professionals: If you hire a professional executor (like a trust company or specialist), they will typically bill the estate as a business expense, often including HST.
Avoiding Conflict
Disputes over fees are one of the leading causes of estate litigation in Ontario. To protect yourself:
Keep a Detailed Log: Record every phone call, bank visit, and email. In 2026, courts are increasingly strict about seeing "proof of work" before approving fees.
Seek Consent: Before taking any payment, provide a full accounting to the beneficiaries and ask them to sign a release approving your compensation.
Check the Will: The deceased may have specified a fixed fee or a lower percentage in the Will, which generally overrides the 5% guideline.
Administering an estate is a complex role that carries personal legal risk. If you are feeling overwhelmed by the paperwork or the math, professional estate specialists can help you navigate the accounting to ensure you are compensated fairly while staying compliant with the law.
Are you currently acting as an executor and wondering if your record-keeping will stand up to scrutiny?
Take the Guesswork Out of Estate Accounting
Calculating compensation correctly is about more than just getting paid for your time. It is about transparency, fulfilling your fiduciary duty, and preventing family disputes before they start. If you are unsure whether your current records or
proposed fees meet the "fair and reasonable" standard used by Ontario courts, you don't have to figure it out alone.
Step 1: Complete the Executor Readiness Assessment
Are you prepared for the accounting requirements of an Ontario estate? Use our quick assessment tool to identify potential red flags in your current administration process and see where you might need more documentation to support a compensation claim.
Step 2: Book a Consultation
If you have questions about specific assets, tax withholdings, or how to present your accounts to beneficiaries, let’s talk. We provide the clarity and confidence you need to ensure the estate is settled correctly and your role is protected.
