The role and responsibilities of an Executor can involve considerable time and effort. As the person responsible for the administration of the estate, the role can be significant and, for that reason, sometimes people include provisions in their Will for payment of an executor’s commission.
However, if there is no provision and an Executor wishes to receive a commission for their duties, they will need to make a claim for commission.
How can an Executor be paid commission?
An executor can be paid commission via one of three ways:
- The Will contains a clause providing for payment of a commission, or some other payment to compensate the executor for their efforts;
- The Executor negotiates payment of commission with the beneficiaries, or;
- The Executor applies to the Court for Executor’s commission.
Is there a set rate of commission for Executors of an estate?
There is a provision in the relevant Act of each state jurisdiction, for an Executor to apply to the Court to be paid commission where probate has been granted.
When determining the amount of commission an Executor is entitled to, the Court will take into account the size and complexity of the Estate together with other relevant factors, including the amount of work involved in realising assets and earning income; the extent and level of administrative activities; the amount of work performed not reflected in financial terms; and the duration of the administration.
The legislation in each state differs in relation to claims for commission. In the ACT, the relevant legislation refers only to receiving a “just” amount of commission. In Victoria, the maximum amount of commission the Executor can receive is up to 5% of the gross value of the estate. In New South Wales, the Court is granted discretion on a case-by-case basis. Although there is no fixed rate of commission, the general rule for fixing the amount of an Executor’s commission in New South Wales is:
- If it is considered to be a simple transfer of assets, the Executor could be entitled to between 0.25-1.25 % of the value of the assets transferred.
- If there is income and capital realisation, the Executor could be entitled to 0.25-2.5%, and;
- If the Executor is collecting income and having to manage the income, then they could be entitled to 1-5% of the value of the assets transferred.
Negotiating a claim for commission with the beneficiaries
If there is no clause in the Will providing for payment of commission to the Executor, the Executor can present their proposal and request for commission, to the beneficiaries. Should the beneficiaries agree and consent to the Executor’s request for commission, then the Executor can be paid out and that is as far as the process goes. If the beneficiaries do not agree with the claim then each party should seek advice from their respective legal representatives and attempt to negotiate and reach an agreement.
If no agreement is reached, then it will be up to the Executor to make a claim for Executor’s Commission to the Court under the relevant legislation. Having regard to the time and expense to the estate in making a claim, parties are well advised to negotiate the amount of commission rather than applying to the Court.
What is involved in applying to the Courts for Executors Commission?
Applying to the Courts for Executor’s Commission can be an expensive and time-consuming process, which inevitably delays the completion of the administration of the estate.
It is not a simple process of filling in a form and applying for payment. The Court will require affidavit evidence covering the entirety of the administration process, the complexity of the matter, details of the values of assets, any incomes retrieved and duties that were performed in the role of Executor.
When should an Executor make a claim for commission?
The Executor should file a claim for Executor’s Commission just prior to the finalisation of the administration of the estate, before it has been distributed and while there are still funds and value in the estate.
Including a provision for Executor’s Commission in your Will
If your Executor is not a beneficiary under the Will, then it is appropriate to consider including a clause in your Will to provide for payment of commission. Doing so can prevent complexities, delays and unnecessary costs during the administration of your Estate.
If a professional such as an Accountant or a Lawyer is the Executor of your Will, there is a general expectation that they be paid for their services. In that instance, it would be appropriate to include a clause in your will providing for payment of the Executor based on their usual hourly rate.
It is less common for there to be an expectation that a friend or family member is paid. However, if you think it is appropriate, you could include a clause providing a specific gift or a set dollar amount from the Estate to the nominated person, for being your Executor.
Claims for commission can be difficult. Consideration to this issue is often overlooked in the estate planning stage. It is recommended that you seek advice from your lawyer when making your will as to the appropriateness of including a clause in your Will dealing with the remuneration of your executor.
The DDCS wills and estate planning team are highly experienced and specialise in helping people navigate issues like these. To discuss your circumstances, phone our team on (02) 62127600 or fill in the contact us form and our team will be in touch.