Should executors be paid or receive gifts?

Who you appoint as the executors of your Will is an important decision. After all, these are the people responsible for carrying out your wishes after you pass away. However, you may wonder whether your executors should be paid or receive a gift in recognition of their efforts in administering your estate.

The role of an executor

Your executor has significant responsibilities, including locating your Will, obtaining probate (if required), managing your estate’s assets, paying debts and distributing inheritances to your beneficiaries. This can be a time-consuming and complex task, especially if your estate includes complicated assets or if disputes arise among your beneficiaries. Further information about the role of an executor can be found here.

Given the effort involved, it’s understandable that you are considering whether your executors (particularly executors that do not otherwise benefit under your Will) should be compensated for their work.

Payment for executors

Your Will can specifically state that your executor is to be paid for their work in administering your estate. This is often the case where a professional person (e.g. a lawyer or accountant) is appointed as the executor. This will often be a pre-requisite to any professional accepting their executor appointment. Quick tip – solicitors are required to disclose their fees to act as executor before you sign your Will, so make sure you receive that information before you sign on the dotted line.

However, even if the Will does not specifically refer to payment, executors are entitled to seek remuneration for their services. This is typically referred to as an executor’s commission. The amount of commission is not fixed and may vary depending on the complexity of the estate and the time spent managing it. In most Australian jurisdictions, executors can claim up to a maximum of 5% of the estate’s value as commission, but this must either be approved by the beneficiaries or determined by the relevant Supreme Court. Further information on applying for an executor’s commission can be found here (SA) and here (NSW).

Generally, a professional person who acts as an executor will not be entitled to an executor’s commission in addition to the normal fees they charge for such work.

Gifts for executors

Another approach is to give your executors a gift through your Will, such as a specified sum of money or a physical asset.

A gift may be a suitable option if your executor is a trusted family member or friend who might feel uncomfortable claiming formal remuneration.

A gift to an executor in a Will can be construed as being dependent on the performance of the executor’s duties. If your executor dies or otherwise fails to carry out those duties, the gift could potentially fail unless the Will specifically says that the gift is non-conditional. We can help you to draft your Will so that your intentions regarding the nature of the gift are clear, ensuring that the chance of a dispute is minimised.

Things to consider when deciding if you will pay or give a gift to your executors

When deciding whether an executor should receive a payment or gift under your Will, consider the following:

Consider whether you need to apply any conditions around when the gift to the executor is to be paid. For example, a gift payable upon the receipt of a Grant of Probate vs. the receipt of a gift at the end of estate administration may influence the executor’s motivation to complete their job.

It can be tempting to consider implementing an annual payment or gift for the years it takes for your executor to administer your estate. Keep in mind that a recurring payment may serve to incentivise an executor to take longer to administer an estate, rather than getting the job done efficiently. It is possible to include clauses that achieve something like this, but they need to be carefully drafted.

What are the executor’s personal circumstances? If they are in receipt of a pension or other kind of welfare payment, giving them a gift under the Will may actually impact their welfare payments. This is something to consider when appointing parents or older family members as executors.

Summary

When deciding whether to pay an executor or give a gift, you can consider:

Complexity: A simple estate may not require extensive work, while a large or complicated estate might demand significant time and effort.
Relationship: Close family members or friends may feel uncomfortable accepting payment but might appreciate a gift.
Professionals: If you appoint a professional executor, such as a solicitor or accountant, they will usually charge a fee for their services.
Clarity: Clearly specifying your intentions in your Will can help avoid misunderstandings or disputes among beneficiaries.

How we can help

Determining the right approach depends on your unique circumstances. We can help you ensure your wishes are clearly documented and legally enforceable, providing peace of mind for you and your loved ones. Call us now on 1300 654 590 or email us.

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