Everything you need to know about Executor Fees in Ontario

Being an estate executor means you’ve taken on the responsibility of honouring your loved one’s wishes, but that doesn’t mean it’s necessarily done for free.

Executors are often entitled to compensation for their time and efforts spent on the settlement process, which is paid out by the estate.

Here is how the executor’s compensation is calculated in Ontario.

Under Ontario’s Trustee Act, an executor is entitled to "fair and reasonable" compensation for their work. Courts often use a guideline of ~5% of the estate flows, which is 2.5% of receipts (what the estate takes in) + 2.5% of disbursements (what it pays out). The amount can be adjusted up or down by a court based on factors like the estate’s size, the level of care/responsibility, time spent, the executor’s skill, and results achieved. Only assets that actually pass through the estate are counted; joint assets and registered accounts or life insurance with a named beneficiary usually bypass the estate and are not part of the base.

Here’s an example of how an estate would compensate an executor under Ontario’s guidelines.

Let’s say an Ontario man passes away with the following assets.

All the above assets are transferred to the estate and distributed to beneficiaries. Using the rough 2.5% guideline on receipts and 2.5% on disbursements, this would amount to approximately $27,750.

Executor fees are guidelines, not fixed rates

Keep in mind that this 5% fee is a general guideline rather than a fixed rate.

According to Section 61(1)of the Trustee Act, a trustee is entitled to "such fair and reasonable allowance for the care, pains, trouble, and time expended in administering the estate" as may be allowed by a judge of the Superior Court of Justice.

Although there is a practice of awarding estate trustees compensation based on a percentage of the following amounts:

• Capital receipts – amounts that add to the estate’s principal (e.g., proceeds from selling the house or investments)

• Capital disbursements – payments out of principal (e.g., funeral expenses, paying debts, specific bequests from the will)

• Income receipts – income earned during administration (e.g., interest, dividends, rent).

• Income disbursements – expenses chargeable to income (e.g., investment management and bank fees, insurance).

Depending on the complexity of the estate, an executor may also charge up to 0.4% per year for "care and maintenance" as a management fee for the estate.

This practice is not set in stone, and executor compensations are actually made on a case-by-case basis.

For example:

(A) For an estate with only one real estate property, the court may warrant less than a 5% executor compensation, seeing as it is a relatively simple estate.

(B) For a larger estate with multiple beneficiaries around the world, and several properties, a reasonable compensation may be higher than 5% seeing as it is a larger and more complex estate.

As outlined by Ontario's Superior Court of Justice, estate executors in Ontario may charge a compensation of up to 5% of the estate's value.

The logic behind the 5% executor fee is as follows:

• Up to 2.5% on the value of assets or cash received
• Up to 2.5% on the value of assets or cash distributed

For a quick estimation based on the maximum rate, use our executor fee calculator below:

Under Ontario’s Trustee Act, an executor is entitled to a “fair and reasonable” allowance, set by the court if not fixed by the will. Courts often start from a guideline of 2.5% of all capital receipts + 2.5% of all capital disbursements + 2.5% of income receipts + 2.5% of income disbursements, and may allow up to 0.4% per year for care‑and‑management where there is ongoing investment management. The court then adjusts this figure up or down using the standard five‑factor test (size, care/responsibility, time, skill/ability, results). For real estate, compensation is usually calculated on the net proceeds that actually reach the estate, not the gross sale price.

Executors have a fiduciary duty to act in the best interests of the estate and its beneficiaries, and their compensation should reflect the level of care and responsibility required to fulfill that duty.

It's important for both the executor and the beneficiaries to have a clear understanding of how the executor's compensation will be calculated and what expenses are included.

Executors receive their fees from the estate once all outstanding taxes and bills are paid, assets are administered, and heirs are located - which is typically paid at the end of the estate settlement process. This process often takes about a year, but can take longer if the estate is complex or if there are disputes among beneficiaries.

The Canada Revenue Agency (CRA) has clear guidelines on how executors' fees should be treated for tax purposes that potential executors should be aware of. Below is a simple breakdown.

CRA’s approach to executors' fees

The CRA classifies executors' fees as taxable income—either through business income or income from an office, depending on the circumstances. If the executor is acting within the scope of a business, the fees are considered business income and included under subsection 9(1) of the Income Tax Act.

On the other hand, if the executor is not acting as part of a business, the fees are classified as income from an office and generally does not withhold CPP/EI/income tax.

This classification has significant implications for the tax return process for executors, requiring careful documentation and reporting.

Wondering about how to incorporate executor fees into your will? We can help

Determining fair compensation for your executor can be challenging, particularly since you won't be there to guide the process. You want to ensure the amount is reasonable and won't create conflict among family members during an already difficult time.
If you’re wondering about writing a will for the first time, or adjusting yours to include executor compensation, reach out to one of our qualified estate professionals for a free 30-minute consultation. We can help guide you through the entire will drafting process, using understandable, non-technical language. We’re here to help