Executor’s commission is seen as compensation for the “pain and trouble” an executor of a Will goes through in carrying out the administration of a deceased estate. An executor’s duties can be demanding and time-consuming. An executor might have to deal with selling real estate and other property, dealing with disgruntled beneficiaries, closing the deceased’s multiple bank accounts, and perhaps even dealing with a court claim made by someone who is contesting the estate.

If a Will does not include provisions for an executor’s commission, an executor who wishes to receive some or further compensation for their services may have to apply to the court to receive a commission.

This article explores when an executor can be paid a commission in NSW, ways of making a claim, and rates of commission.

Methods of Payment

There are three primary methods by which an executor in NSW can be paid for their services:

Provision in the Will

If the Will contains a clause specifying payment of a commission or compensation for the executor.

Negotiation with Beneficiaries

If there is no provision in the Will, the executor should present their proposal for commission to the beneficiaries. If the beneficiaries agree, the executor can be paid commission without court involvement. If an agreement cannot be reached, both parties should seek legal advice and attempt to negotiate a fair amount to avoid court proceedings.

Application to the Court

If negotiations with beneficiaries fail, the executor can apply to the court for an executor’s commission. The court will determine the appropriate amount based on various factors.

Section 86(1) of the Probate and Administration Act 1898 (NSW) allows for payment of such commission to an executor for their time and effort spent in administering the estate as is just and reasonable.

What does the Court consider?

When determining the amount of commission to which an executor is entitled, the court will consider the size and complexity of the deceased estate together with other relevant factors, including the extent and level of administrative activities, the amount of work involved in realising assets and earning income, the duration of the administration, and the amount of work performed not reflected in financial terms.

In most instances, the commission is available to all executors other than those whose conduct is dishonest, fraudulent or in breach of their duties as an executor. In such cases the court may disentitle such commission.

The Executor Beneficiary

An executor who is also a beneficiary may apply for commission. However, depending on the work required of the executor and the value of the estate, a court may consider an executor’s entitlement as a beneficiary sufficient or order the payment of a commission.

Timing of Commission Claim

Executors should file a claim for executor’s commission just before finalising the estate’s administration. The executor’s compensation should be addressed while there are still funds and assets within the estate before a final distribution to beneficiaries.

Rates of Commission

The rate of commission an executor can receive is determined on a case-by-case basis. Whilst there is no fixed rate, the general guidelines for fixing the amount of an executor’s commission are as follows:

Simple Transfer of Assets

For straightforward estate transfers, the executor may be entitled to 0.25% to 1.25% of the value of the assets transferred.

Income and Capital Realisation

If the estate involves income and capital realisation, the executor’s commission may be 0.25% to 2.5%.

Managing Income

Where the executor is responsible for managing income, the commission could be 1% to 5% of the value of the assets transferred.

Include a provision in your Will

To simplify the process and avoid potential conflicts, a testator should consider including in their Will a clause specifying payment of commission to the executor. This is especially relevant when the executor is a professional, like an accountant or lawyer, who would typically expect compensation for their services. If a friend or family member is appointed as executor, the testator should consider including a clause for specific gifts or a set dollar amount in the Will.

Takeaways

Applying to the court for executor’s commission can be time-consuming and costly. It involves providing detailed evidence of the administration process, including asset values, income, and duties performed. This process should be considered only as a last resort and pursued when all other avenues have been exhausted.

How we can help

Contact us if you are an executor and wish to seek a commission to discuss the available options.