The right to compensation
Compensation for attorneys is different from compensation of estate trustees (executors) in that the rate is fixed by statute.
Unless the power of attorney expressly excludes compensation, in Ontario an attorney for property is generally entitled to compensation at the following rates:
- 3% of income and capital receipts
- 3% of income and capital disbursements
- 0.6% per year of assets under management.
Note, however, that an attorney who receives compensation is held to a higher standard of care than one who does not.
An attorney must keep detailed accounts and records of all transactions involving the property of the grantor. This includes detailed records of all assets, all income, all expenses and dispositions of assets. The attorney must maintain these records until relieved of the obligation – usually by Court order, or, by giving the records to the trustee of the estate of the grantor after the grantor’s death.
Many attorneys fail to keep proper records. This exposes them to liability and creates unnecessary ill-will. An attorney should avoid cash transactions, always get and retain receipts, and ensure that there is a well-documented and properly organized paper trail for the entire period that they were the attorney.
Passing accounts is the process of formally submitting accounts to the Court for approval. This is the most common method of airing and resolving disputes about the actions of an attorney, including but not limited to their compensation. Similarly, attorneys who think that they have been unfairly accused of improper conduct use a formal passing of accounts to secure Court approval of their accounts.
An attorney may voluntarily choose to pass their accounts, or, may be required to pass their accounts. For instance, the trustee of the estate of a deceased grantor may require an attorney who acted under a PoA prior to the death to pass their accounts.
If, the attorney acting under a PoA prior to death is the same person as the executor under the will, the beneficiaries of the estate may, on leave of the Court, require the attorney (now executor) to pass their accounts for period when the attorney acted under the PoA. This is separate and distinct from the obligation of the executor to prepare, and potentially pass, the executor’s accounts.
A passing of accounts is a formal Court proceeding governed by the Rules of Civil Procedure. Mandatory rules govern every aspect of these proceedings, including form and content of the accounts, the process for initiating a passing of accounts, the parties who must be served and how, the rights of the various parties to submit evidence and argument and contest the attorney’s accounts, and the right of various participants to reimbursement of some or all of their legal fees.