Administering an estate can be an onerous task taking up time, potentially months, perhaps in some cases, years.
In carrying out the role of administration of an estate the executor’s ability to earn income or participate properly in their own business may be affected, it may limit their ability to spend quality time with family, not to mention it may impact their mental health.
What is executor’s commission?
In some cases, an executor may be entitled to claim what is referred to as ‘executor’s commission’.
‘Executor’s commission’ is the term used to refer to a payment to the executor from the estate for their ‘pains and troubles’ in administering the estate, and the impact the role has on their personal life.
Is there an automatic entitlement to executor’s commission?
No, there is not an automatic entitlement for an executor to receive commission from the estate. It is for this reason that it is important for the executor to receive advice before any such claim or notice of an intended claim is communicated to the beneficiaries.
Such matters will impact whether an executor can receive commission:
- The nature of the work involved in the estate. If the estate is straightforward and simple, and the executor engaged a solicitor to act on their behalf, it may be unlikely that a Court would order commission to be paid to the executor.
- If the executor has not carried out their role in a timely fashion, or if they have not adhered to their duties in administering the estate. For example, if the executor has acted in such a way that they have delayed administration, or if they have not properly represented the interests of the beneficiaries, the Court is likely to refuse the executor commission.
- If the executor is a beneficiary under the Will, the Court will consider what interest the executor has as a beneficiary of the estate when determining the amount of the commission.
How can an executor claim commission?
There are two ways that an executor may claim commission.
- Firstly, if all the beneficiaries of the estate agree to the executor’s claim for commission, then the commission can be paid to the executor by way of an agreement. It is best that this agreement is written and signed by all relevant parties.
- Secondly, an executor can make a claim to the Court for an order that they receive commission in a certain amount.
In my view, the executor should always attempt to reach an agreement with the beneficiaries of the estate to be paid a commission. Reaching an agreement is by far more commercial in comparison to an executor making an application to the Court.
Depending on the size of the estate, the cost of making an application to the Court may outweigh the actual amount of commission. In such case, the Court will take into consideration the case where the executor has proceeded straight to an application to the Court and not attempted to resolve the matter with the beneficiaries which can accordingly, if such a cost can be avoided, it certainly should be.
How much commission is an executor entitled to receive?
The amount of commission payable to an executor will vary depending on the estate.
The Court will consider the degree of responsibility exercised, the amount of skill and knowledge of the executor required and applied to the estate and their role and the value of the beneficiaries of the work done.
From there, the Court will determine the amount of the commission.
As a general rule, the Court operates within an informal scale that sees an executor receive commission being:
- 1.5% of income from the estate – this relating to income bearing assets, and where the estate is earning income;
- 2% – 2.5% of the capital of the estate – this normally relates to the gross value of the estate.
However, I must stress that commission will vary from case to case. The rate of commission is not ‘one size fits all’.
Why is it important for an executor to seek legal advice before putting forward a claim for commission?
One of the most critical parts in acting as an executor is maintaining an open and transparent relationship with the beneficiaries.
Where there is open communication and transparency between the executor and the beneficiaries, the executor is able to carry out their role and complete the administration of the estate more effectively and time efficiently.
If an executor prematurely puts forward a claim for commission or puts forward a claim for commission that may be viewed as excessive in the context of the estate, then the executor jeopardises the relationship they have with the beneficiaries of the estate.
Once the relationship between the executor and the beneficiaries is compromised there is every risk that the estate will be delayed or compromised because of the beneficiaries’ lack of trust in the executor. This often results in the beneficiaries seeking independent advice and scrutinising the executor’s every move in the administration of the estate.
If you have any questions in relation to executor’s commission, whether you are an executor considering making a claim or a beneficiary in an estate where a claim has been put forward, please do not hesitate to contact me.
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