Estate administration and payment for executors can be confusing, and that’s the last thing your family needs when a loved one dies. We are here to make this process easier for you. If you require further information regarding an executor’s remuneration, please call us on 1300 580 413.
Is an executor entitled to payment?
The executor of an estate is entitled to be paid for their time and effort in carrying out the administration of the estate. There a number of ways the payment may occur, including:
- The will-maker leaves a provision in the will specifying payment.
- The will-maker leaves assets to the executor and specifies it is intended as payment.
- The executor applies for payment of commission based on the nature of the estate they are administering.
A will may provide for a specific amount or a specified gift to be received by an executor in consideration of their services. It may state a rate of payment in terms of a percentage of the total assets and/or income of the estate.
Reimbursement of expenses
An executor is entitled to be reimbursed by the estate for all appropriate expenses incurred. However, if expenses are not deemed appropriate, the executor’s commission may be reduced in line with the expenses. In some cases, the commission may be revoked altogether.
What is executor’s commission?
An executor may seek “commission” based on the nature of tasks performed and responsibility taken for maintenance or care of assets. The executor’s burden is often referred to as “pains and troubles”. The extent of commission depends on the extent of the pains and troubles.
Duties undertaken by an executor might include:
- Taking stock of assets
- Arranging memorials
- Negotiating with beneficiaries
- Settling debts
- Preparation of properties for sale
- The conduct of a business pending sale
- Deciding sale prices and performing sales
- Investment of funds
- If required, managing life tenancies.
These can all be onerous duties.
The executor accepts responsibility as a trustee or fiduciary and can be personally sued for mistakes.
It’s important to note that an executor’s commission cannot be levied without an order of the court or unanimous agreement of beneficiaries.
As a rule of thumb, the maximum commission allowed by a court will be 6% on income derived and 5% on capital realised.
The maximums are generally reserved for very complicated, long duration or time-consuming estates.
Executors should keep records of work done in their executorial role to justify commission.
Agreement with beneficiaries
Generally agreement with beneficiaries can be reached if the executor provides particulars of the effort expended and risk/responsibility taken in connection with the performance of each task which was required to be performed in relation to the estate.
Simply request each beneficiary to sign a release as to the appropriate performance of all responsibilities; an acquittal of all responsibility; and authorisation for a particular sum for commission.
The payment from the estate can then be made before the final distribution to each executor.
Application to the court
If agreement can’t be reached, an application to the court can be made. The estate generally bears the expense of the executor’s legal costs for the application.