Estate Administration: The Executor’s Commission in NSW

Estate Administration: The Executor’s Commission in NSW

Q: Will I be paid for the work I do as an executor of a Will?

A: It depends…

Administering an estate as an executor can be a demanding and time-consuming role. You might find that you’ve had to deal with closing the deceased’s multiple bank accounts, selling real estate and other property, dealing with disgruntled beneficiaries, and perhaps even dealing with a court claim made by someone who is contesting the estate.

While some Wills may include provisions for an executor’s commission, many do not. In such cases, a person who is an executor of a Will and wishes to receive some or further compensation for their services, must often apply to the court to receive a commission. Each State has its own rules on this topic. See here for our article about making a claim for an executor’s commission in South Australia.

This blog explores in what circumstances an executor can be paid a commission in NSW, the rates of commission, and the processes involved in making a claim.

Methods of Payment

An executor of a Will in NSW can receive payment for their services through three primary methods:

  1. Provision in the Will: If the deceased’s Will contains a clause specifying payment of a commission or compensation for the executor, this provision should be followed.
  2. Negotiation with Beneficiaries: In cases where there is no provision in the Will, the executor can negotiate with the beneficiaries. If the beneficiaries agree to the executor’s request for a commission, the payment can be made without the need for further legal proceedings.
  3. 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.

Negotiating a Commission

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 receive their commission without court involvement. However, if an agreement cannot be reached, both parties should seek legal advice and attempt to negotiate a fair amount to avoid court proceedings.

Court Application Process

Section 86(1) of the Probate and Administration Act 1898 (NSW) allows for a commission to be paid to an executor for their time and effort spent in administering the estate, as is just and reasonable. If there is more than one executor, usually a joint application is made to the court, although, in some circumstances individual applications may be more appropriate.

What does the Court consider?

When determining the amount of commission an executor is entitled to, the Court will consider the size and complexity of the deceased 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.

In most instances, the commission is available to all executors, except for executors whose conduct is dishonest, fraudulent or in breach of their duties as an executor. In such cases the court may disentitle such commission.

The Executor Beneficiary

An executor who is also a beneficiary is not preventing from making an application for commission. Depending on the value of the estate and the work required of the executor, a court may consider an executor’s entitlement as a beneficiary sufficient or order the payment of a commission.

Timing of Commission Claim

Executors should file a claim for executor’s commission just before finalising the estate’s administration, while there are still funds and assets within the estate. This ensures that the executor’s compensation is addressed before distribution to beneficiaries.

Rates of Commission

The rate of commission an executor can receive in NSW is determined on a case-by-case basis. While there is no fixed rate, the general guidelines for fixing the amount of an executor’s commission are as follows:

  1. Simple Transfer of Assets: For straightforward estate transfers, the executor may be entitled to between 0.25% to 1.25% of the value of the assets transferred.
  2. Income and Capital Realisation: If the estate involves income and capital realisation, the executor’s commission may range from 0.25% to 2.5%.
  3. Managing Income: In cases where the executor is responsible for managing income, the commission could be between 1% and 5% of the value of the assets transferred.

Including a Provision in Your Will

To simplify the process and avoid potential conflicts, a Willmaker should consider including a clause in their Will specifying the 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. For friends or family members acting as executors, including a clause for specific gifts or a set dollar amount in the Will should also be considered.

Conclusion

Applying to the court for executor’s commission can be time-consuming and costly. It involves providing detailed evidence of the administration process, including asset values, income, and duties performed. This process should be considered as a last resort and pursued when all other avenues have been exhausted.

How we can help

If you are an executor and wish to seek a commission, call us on 1300 654 590 or email us. We can speak with you about the options available and provide you with a plan so that the estate can be finalised, and you can be appropriately remunerated.

 

The information contained in this post is current at the date of editing – 12 October 2023.

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