How Much Does it Pay to Be Executor?

A commonly asked question in both estate planning and estate administration is “How much does the executor get paid?”  In order to evaluate that question, three issues need to be addressed: (1) the statutory allowance for compensation, (2) the options in drafting compensation clauses in a Will, and (3) the effect of case law of commissions.

In New Jersey, the law provides that an executor is entitled to three forms of payments.  The first is commissions on principal.  When an individual dies, the executor may take a commission on the principal of 5% of the first $200,000, 3 ½% of the next $800,000 and 2% of the balance.  The executor may also take a commission of 6% of the income generated on the estate assets between  the date the executor receives his or appointment and the date the assets are ultimately distributed to the estate’s beneficiaries.  If taken, both of these commissions are taxable income to the executor.  It should be stressed that the commissions are only to be taken on probate assets which pass through the probate estate.  Thus, assets which pass to a joint account holder or by beneficiary designation, such as life insurance, retirement plans and annuities, are not included.  Also, certain specific bequests such as real distributed to one or more individuals is not included.  The third form of payment is for out of pocket expenses incurred by the executor such as travel costs and reimbursements for payments advanced on behalf of the estate.  These are not taxable.

Recognizing what the law allows, there are a variety of ways in which wills can be drafted to address this issue.  There are four primary provisions.  The first is a direct statement that the executor is entitled to the statutory allowances detailed in the preceding paragraph.  The second is that the executor will serve for a flat fee.  The third is that the executor will serve without any compensation.  The fourth is a statement that the executor shall be entitled to reasonable compensation.  Although this last form allows the statutory allowances to be taken, it can be interpreted as a request for the executor to consider whether he or she should take the full amount or not.  These provisions effect the appointment of an individual executor.  It should be noted that financial institutions typically require language that they will serve pursuant to their existing schedule of charges.

Of course, regardless of what is said in the statute or a Will, the compensation of an executor can be changed in one of four ways.  First, if the performance of an executor entailed extraordinary efforts, additional compensation may be sought (although this is rarely, if ever, granted).  Second, the court will not enforce a clause that deprives the executor of a commission.  Third, if the Executor, by his or her acts or omissions, causes a loss to the estate in a manner deemed grossly negligent or fraudulent, he or she may have to repay the estate for such loss.  Fourth, a court may reduce the commission if it determines that the effort which the executor had to undertake did not warrant the amount of compensation set forth the statutory formula.

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Thomas D. Begley, III

About the Author

Thomas D. Begley, III is the co-chair of the Trusts & Estates Group at Capehart Scatchard. He is a Certified Elder Law Attorney (CELA) who earned both his undergraduate and law degrees from Georgetown University, located in Washington, D.C. He concentrates his practice in the areas of estate and tax planning, estate administration, small business representation, elder law, and probate litigation. He is an accomplished author and lecturer who has frequently spoken on behalf of the National Academy of Elder Law Attorneys and the New Jersey Institute for Continuing Legal Education as well as other professional organizations. He has been named a “Super Lawyer” as voted by his peers and facilitated by New Jersey Monthly in the area of Trusts and Estate Litigation on numerous occasions. He has attained the prestigious AV rating by Martindale-Hubbell.

2 Enlightened Replies

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  1. Ms. Kuuderes says:

    Mr. Begley, I am the administrator of an estate. The decedent had no children. The decedent’s taxes are being prepared and there is property to sell prior to disbursing to the beneficiaries. The decedent’s siblings constantly call and write letters inquiring about the estate and demanding an accounting. Can I charge each beneficiary that calls, writes a letter requiring a response, or requests an accounting an hourly fee for my time and a cost per page for the accounting or do I charge the estate? How much should I charge per page? Can I disburse payment to myself now for the time it takes to respond to the calls, letters and requests for an accounting or do I have to wait until I receive a Release from all beneficiaries? Can I reimburse myself now for payment to obtain a bond and other payments advanced on behalf of the estate or do I have to wait until I receive a Release from all beneficiaries?

    • Ms. Kuuderes, sorry to hear that you are being hounded by what are apparently very impatient beneficiaries. You are entitled to a commission. In NJ, it is calculated by a set fee. Of course, if you want to lighten the aggravation, hire an attorney to communicate with them. It should not affect your commission. If they are unreasonable in their time demands, it will cost them. Good luck. Tom

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