Administering an estate can be arduous and time-consuming, which is why Executors to estates may be entitled to a commission for undertaking the work they do to ensure the estate is distributed accurately and in accordance with the deceased’s wishes.
It is not always a cut and dry case for Executors seeking their commission, though. Here’s what you need to know about how much they are entitled to and how an Executor can make a claim for their commission.
What is an Executor and what types of duties do they perform?
An Executor is a person (or people) who has been nominated to handle a deceased person's estate after they pass away.
They typically perform the following types of duties:
- applying for probate;
- paying liabilities;
- preserving the estate’s assets;
- managing the deceased’s affairs; and
- distributing the assets after probate has been granted.
Is the Executor entitled to a portion of the estate?
Executors’ commission is not necessarily made up of a portion of the estate, it is an amount that is calculated by the Executors based on how complex the duties were, whether those duties were delegated to professionals or undertaken personally by the Executor, the amount of time spent administering the estate and the size of the estate.
There are caps on the amount of commission that can be paid, too. For example, the maximum amount of commission allowed by a court is 5% on capital realised and 6% of income derived. Typically, however, in cases where Executors have been successful in applying to the court for commission, the court has awarded the commission of between 1.5% and 3% on capital realised and between 3% and 5% on income derived. Amounts on the upper end of the scale are usually paid when the estate is large, complex, and requires more time and effort than usual to administer.
In some cases, the deceased will set aside a certain amount of the estate to be paid to the Executor in recognition of the performance of their duties as Executor in lieu of commission.
Does every Executor automatically get paid a commission?
No. Executors’ commission can only be paid if:
- both the Executor and all of the beneficiaries agree unanimously that a commission should be paid; or
- the deceased’s Will expressly states that a commission should be set aside in the form of either payment or an allocation of assets.
Alternatively, commission may be paid by order of the Supreme Court after application by the Executor.
If the beneficiaries are under the age of 18, an application will need to be made to the court regardless of whether they agree commission should be paid.
If an application is made to the court, the legal expenses incurred by the Executor will usually be covered by the estate.
How does an Executor go about claiming their commission?
If an Executor believes they are entitled to a commission for the work they have performed administering an estate, they will need to:
- undertake all of their duties effectively, efficiently, and with as much transparency as possible;
- keep thorough records of any work undertaken as well as records of the time spent performing the tasks;
- be able to use those records to form the argument for why they feel they are entitled to a particular sum of commission and have the beneficiaries sign a release for payment.
Executors should also follow this process to ensure they are reimbursed for expenses relating to the administration of the estate.
If you are an Executor trying to establish your right to commission, or you are a beneficiary who does not believe the Executor is entitled to a commission, our Estates lawyers can assist on (07) 4052 0700.