Executor fees — don’t forget to deduct

A Testator of a Will may give a gift to his or her Executor, who is appointed in a Will. In British Columbia, such a gift is typically tax-free.

If the Will leaves no gift, however, an Executor can claim Executor fees by law. Being an Executor usually involves a lot of work, so it is fair to claim fees.

The maximum Executor fee, in B.C., is 5% of the gross value of the Estate. If the Executor claims the fee, it is taxable income that must be reported in his or her next tax return.

It is worth discussing the tax with an Accountant, because the Executor may need to deduct CPP and EI amounts in addition to the tax.

If an Executor does that kind of work routinely in his or her business, he or she would have to treat the Executor fee as “business income.” If the Executor acts in just one Estate, the income would be considered “employment income.”

Either way, Executors must deduct.

This ad appeared in the Richmond News on February 1, 2013.