An executor’s duties can be demanding and time-consuming. Executor’s commission is seen as compensation for the “pain and trouble” an executor goes through in carrying out the administration of a deceased estate.

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

The Probate and Administration Act 1898 (NSW) allows an executor to be paid such commission as is just and reasonable for their time and effort spent in administering the estate .

What does the court consider?

When determining the amount of commission to which an executor is entitled, factors the court consider include the:-

• size and complexity of the estate;
• extent and level of administrative activities;
• amount of work required to realise assets and earn income;
• duration of the administration; and
• amount of work performed not reflected in financial terms.

Generally, 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.

What if the executor is also a 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 and refuse to order payment of commission.

Timing of commission claim

Executors should file a claim for executor’s commission just before finalising the estate’s administration, whilst there are still funds and assets in the estate before a final distribution to beneficiaries.

Rates of commission

The rate of commission is determined on a case-by-case basis. There is no fixed rate but 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. Detailed evidence of the administration process must be provided, including asset values, income, and duties performed. Applying for commission should be considered as a last resort to be pursued only when all other avenues have been exhausted.

Here to Help

Contact us now for free no obligation initial telephone advice about payment of commission to an executor.