You Sold the Estate’s House as Executor — Can You Pay Yourself? Ontario Estate Trustee Compensation, and Why the “5% Rule” Isn’t Law

You were named estate trustee, sold the family home and spent months winding everything up. Ontario law does let you take a fee — but you don’t set the number, and the “5%” everyone quotes appears in no statute at all.

I’m Arthur Zhao. Picture the moment the estate’s biggest cheque finally clears: the house has sold, the proceeds are sitting in the estate account, and you — the person named to run all of this — have to decide how much of that money to move into your own account for the work you put in. That decision feels like it is yours to make. It isn’t.

Here is what most people get wrong before they even start. They assume the fee is a figure you set and a percentage you are owed — the “5% of the estate” you meet in every online answer. But that 5% appears in no Ontario statute, and the amount is not yours to fix: the law pins it to a single standard, “fair and reasonable”, and hands the final say to a judge. Pay yourself off a rule of thumb and you may find the beneficiaries — or the court — pulling the money back.

What follows is how the fee actually gets decided: the statute that grants it, why selling the house cuts both ways in the math, who has to sign off before you keep a dollar, and whether the taxman treats it as income. Plus the one clause that, written into a will today, keeps the whole question off a courtroom floor. This is educational, not legal or tax advice — for your own estate, sit down with an estates lawyer and an accountant.

The short answer: yes you can be paid — but you don’t set the amount

Lead with the one sentence that matters: in Ontario an estate trustee is entitled to a fee for handling the estate — but how much that fee is gets decided by a court on a standard of reasonableness, not by you.

The authority is Trustee Act s.61(1). In its own words, a trustee, guardian or personal representative is entitled to “such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice.”

Notice the two load-bearing phrases. One is fair and reasonable — that is the only legal standard the whole system runs on. The other is as may be allowed by a judge — which hands the final call to the court. You can claim a number, but a claim is not the same thing as money in your account.

The statute gives you three words, not a rate card

People assume estate law must hide a fee schedule somewhere — flip to the right page and read off the rate. There is no such schedule.

Ontario’s Trustee Act s.61 contains no percentage at all. The standard it sets is the single phrase fair and reasonable, and then it defers to the judge. As one Ontario estates firm puts it bluntly: there is “no statutory guidance” on how compensation is calculated — the whole method “has evolved through the common law.” A few other subsections in s.61 are worth knowing:

• s.61(3) lets the judge approve a reasonable allowance when passing the accounts;
• s.61(4) says that where the trustee is a solicitor who provided necessary legal services to the estate, that can be taken into account and an appropriate amount added;
• s.61(5) says that if the instrument creating the trust — the will — already fixes the compensation, s.61 does not apply. The will wins.

That last one, s.61(5), is quietly the most useful subsection for an ordinary family. More on it at the end.

So where does that famous “5%” come from?

If the statute has no percentage, where does the “2.5% in, 2.5% out, roughly 5%” figure come from? It is a courtroom rule of thumb the judges built over many decades — not a line of legislation.

In Ontario estate practice the court typically starts by running a set of percentages: 2.5% on capital receipts (money coming in, such as the sale of the house), 2.5% on capital disbursements (money going out), 2.5% on revenue receipts and 2.5% on revenue disbursements. Where the estate is not wound up straight away and has to be managed over time, the court may add an annual care-and-management fee of about two-fifths of one percent (roughly 0.4%) of the average value of the assets. Add the four buckets together and you get that loose “about 5%.”

Two things to hold onto: first, this is a starting point, not the finish line; second, it has no binding force — the judge can push it down, or, less often, up. Treating it as “I am automatically owed 5%” is the single most common mistake people make here.

The five factors the court uses to reality-check the number

Running the percentages is only step one. An Ontario court then tests the result against a set of five factors, which trace back to an old case (Toronto General Trusts Corp. v. Central Ontario Railway) and get cited again in later ones such as Re Jeffery Estate:

1. the magnitude of the estate — how big the job was;
2. the care and responsibility involved — how much you shouldered and how much risk you carried;
3. the time occupied — the hours you actually put in;
4. the skill and ability shown;
5. the success of the administration — how well it all turned out.

These five are the brake that pulls a cold percentage back to reality. A large but low-effort estate can see the fee trimmed below the tariff; a modest estate that put you through the wringer — litigation, disputes, a difficult property — can see it nudged up. The court is looking at what the job actually took, not just what the assets were worth.

How the house you sold feeds into the number

This is where the topic meets the sale itself. In most estates the house is the single biggest number, and it enters the compensation math from two directions:

• the proceeds of the sale land in capital receipts — sell the home for $800,000 and that $800,000 sits in the “money in” column;
• paying out the beneficiaries and clearing the mortgage land in capital disbursements — the “money out” column.

So the sale inflates both sides of the tariff, which is why estates that involve selling a home tend to throw off a larger starting figure. But that is only the starting figure. If the house was handed to a listing agent and sold cleanly with little effort from you, a judge weighing the five factors may well decide the care and responsibility you personally brought to that piece was limited, and trim the corresponding fee. A high sale price does not automatically mean a bigger cheque for you — the court looks at what you did for it, not what it was worth.

Who actually signs off: the passing of accounts

You cannot simply move money from the estate account into your own and call it done. Your fee is either agreed to in writing by all the beneficiaries, or it goes through a court process called a passing of accounts.

On a passing of accounts the estate trustee files a formal set of estate accounts and asks the court to approve them — and to approve the compensation and costs at the same time (this is exactly the moment s.61(3) refers to). The procedure lives in Ontario’s Rules of Civil Procedure, Rule 74. A few points matter most to a reader:

• the beneficiaries are served and are entitled to review the accounts;
• a beneficiary who disagrees can file a formal Notice of Objection before the hearing, including an objection aimed specifically at the amount of compensation;
• if no one objects, the court can generally grant judgment approving the accounts and the compensation without a hearing.

In other words, your fee is not settled by private back-and-forth with the beneficiaries — it is put in front of a court, with a process and remedies attached. Which is exactly why the mechanics of a passing of accounts are best left to an estates lawyer.

How the fee is taxed depends on who you are

The one move that spares the fight: fix it in the will

If you take one practical thing away, take this. The cleanest way to avoid a compensation fight is to deal with it before anyone has to argue — by naming the estate trustee’s compensation in the will itself.

That is what s.61(5) is for: once the will fixes the fee, s.61 does not apply, and there is nothing for the beneficiaries to litigate over. You can set a fixed dollar figure, a percentage, or a formula. Compare that to the default: no words in the will, the trustee claims a number after the death, someone objects, and a judge ends up deciding it at real cost to the estate. One sentence in a will, drafted while everyone is alive and calm, quietly closes off a dispute that would otherwise land on your children.

Arthur Zhao

Real Estate Broker · FRI · ABR · SRS · PSA · MCNE · E-PRO · CLHMS & GUILD Elite · REAIS

VP & Branch Manager, Bay Street Group Inc.

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