One issue that can come up in estate administration, and which should be carefully planned out in estate planning, is the issue of compensating executors for taking care of estate administration matters. Administering an estate can very often be a difficult, time-consuming experience.
The basic principle is that executors are entitled to receive a commission for performing any work required in the administration of the estate. This includes time spent cleaning out a home and distributing that property, as well as any other efforts in administering the estate.
Under New Jersey law, the executor’s commission is determined by the valued of the assets in the estate. For estates up to $200,000, a five percent commission is allowed. For estates up to $10,000, a 3.5 percent commission is allowed. For estates over that amount, there is a 2 percent commission. For all estates, there is an additional 6 percent commission based on the annual income of the estate. Courts are authorized by statute to permit a larger commission if administration of the estate is particularly difficult of demanding.
Executors seeking commissions for administering the estate are advised to carefully abide by the will and to consult an attorney to ensure that any special provisions concerning the executor’s duties or payment are followed. Any compensation given to an executor must be reasonable based on the tasks performed, and not exceed what it would cost the estate to hire somebody else to perform the work.
One important thing to keep in mind is that, although the executor is responsible for administration of the estate according to the will, an executor may hire somebody else to take care of certain aspects of the administration.
Executor’s commissions are usually deductible for purposes of calculating estate or inheritance tax, or may be deductible against income taxes assessed on the estate or its beneficiaries. Another thing to keep in mind is that if the beneficiaries of the estate oppose compensation of the executor, the latter may have to seek court approval before receiving the compensation.
Source: Star Ledger, “Karin Price Mueller, “Child of hoarder faces quite a task after mother’s death,” Karin Price Mueller, 5 June 2011.