Can I Claim Commission as an Executor for an Estate?

KEY TAKE-OUTS

• If you are an Executor, you may apply to the Court for Commission.
• Commission from an Estate is a Court Ordered payment owed to an Executor.
• Although an Executor is entitled to receive Commission from an Estate, they do not automatically receive Commission.
• An application to receive Commission from an Estate is not mandatory and it is up to the Executor to decide this. If an Executor wishes to claim Commission from an Estate, they may apply to the Court should the beneficiaries of the residual not agree.

What are the Executor’s Responsibilities?

An Executor is a person appointed by a Will of a Deceased person and has the job of controlling and managing the Estate. When someone passes away, it is the Executors responsibility to finalise the Estate. This will include notifying the Court of the persons passing by applying for a Grant of Probate. Importantly, not all Estates require a Grant of Probate as this is dependent upon the nature of the Estate assets.

Some general duties for an Executor include:

• Arranging the funeral.
• Liaising with a Deceased Estates Lawyer.
• Applying for a Grant of Probate (if appropriate).
• Corresponding with asset holders and creditors.
• Keeping records of the Estate’s accounts and distributing them to the Beneficiaries.

What is a ‘Commission’?

A Commission is an amount payable from the Estate to an Executor to compensate them for their time and effort in performing the job as an Executor for an Estate. The Supreme Court of New South Wales (“the Court”) considers Commission to be a payment in compensation for the Executors “pains and trouble” experienced in finalising the Estate (Section 86 of the Probate and Administration Act 1898 (NSW)).

The process for applying for Commission

The process to apply for Commission is by way of application to the Court. If multiple Executors in an Estate wish to apply for Commission, then they can all apply together. However, if only one Executor is seeking an award of Commission, then they may proceed on a sole Application.

The Application for Commission must be accompanied by the accounts relating to the Application. The Court will then complete a ‘passing of accounts’, whereby they will ensure that there is an accurate record of the Estates accounts from the time of death and up until the time of the Application. This process also ensures that the Executors has managed the Estate effectively and efficiently.

The nature of some of the items to be included in the accounts of the Estate include

• Income received.
• Details of any interim distribution made.
• Any expenses paid by the Executor or Beneficiary on behalf of the Estate.
• The details of any assets sold, transferred or reinvested.
• Estate’s Solicitor fees.

The supporting evidence is embodied in an Affidavit. The Affidavit should include an overview of the entire management of the Estate including the steps and process taken, issues that have arisen (if applicable) and any other information the Executor sees applicable.

The considerations and decision to award Commission

Once the application is lodged, the Court will consider many aspects of the claim, including the evidence provided in the Affidavit and all accounts that have been passed. Generally, some examples of circumstances taken into account include:

• If the Estate was privy to commencement of litigation.
• If you are noted as a Beneficiary under the Will.
• The size and nature of the Estate, including the amount of work required.
• Your manner in conducting and finalising the Estate.
• If there were any issues in conducting the Estate, such as lengthy delays on the Executors behalf or a failure by the Executor to keep an accurate record of accounts.
• How the Commission will affect the Beneficiaries proportion of the Estate.

It is important to note that the Court will highly consider if an Executor is provided with a gift under the Will. This is because there are situations where a gift is provided to the Executor upon the condition of them performing such a role for the Estate. In these circumstances, the Court may not be inclined to provide further Commission to the Executor, as the gift is considered to be the ‘Commission’ given to the Executor.

Once the Court has taken into consideration all matters that may affect the award of Commission, they will use their discretion to make a decision and notify the Executor. If the decision is to award Commission to the Executor, the Court will make an Order as to the amount to be paid and the method of payment. Although there is no set fees or scale of fees under the legislation, the Court may base their decision on a rough guideline, as follows:

• Between 0.25% to 1.25% of the value of the assets transferred in species.
• Between 0.25% to 2.5% of the income on capital realisations.
• Between 1% to 5% on income collections.

An alternative approach

It is commonly known that the Court processes may take longer periods of time and it has been advised by the Court that the delays in the review and award of Commission may delay the finalisation and distribution of an Estate.

It is recommended that an Executor, who wishes to receive Commission from an Estate, reaches out to the beneficiaries of the Estate, and has a conversation about their intentions. This conversation may open up the opportunity for an alternative approach to receiving Commission, as the Beneficiaries may consent to the idea of providing Commission to the Executor. If the Executor and Beneficiaries agree on an amount to be awarded, then the Executor is not required to file an Application with the Court and rather the Commission can be paid to the Executor more informally.

A benefit of this approach will be that the time delays can be kept to a minimum, provided the Beneficiaries agree. Another benefit is that the Estate will not be subjected to the fees associated with the Application to the Court and the time required by the Court to pass the accounts. However, if this approach does not work then the Executor still has the opportunity to apply to the Court.