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Estate Planning: Understanding Executor Commissions

If the Last Will and Testament allows for statutory compensation for an executor, the executor can get paid commissions which are calculated as a percentage of the combined value of the assets of the estate plus income.  However, some assets are usually excluded from the fee calculation including:

  • All assets passing outside of the estate. For example – accounts or policies payable to named beneficiaries, “in trust for” accounts, joint assets with rights of survivorship, etc.;
  • Assets that are specifically given to a person or organization, known as a specific bequest;
  • Real estate that is not sold by the executor or administrator.

Generally, everything that the decedent owned individually at the time of his or her death is included in the probate estate. This includes any business interests or real property owned by the decedent individually, any stocks, bonds, bank accounts or brokerage accounts held individually, automobiles, tangible personal property, works of art, furniture, jewelry and collectibles.

If there is more than one Executor, the Executors may be required to share commissions, depending on the size of the estate. If the value of the probate estate (less any specific bequests of personal property or cash amounts to named individuals or institutions) is more than $300,000, each Executor (up to a total of two) is entitled to be paid a full commission. If more than two Executors are named, they must split two full commissions, unless the decedent has specifically provided otherwise in writing.

The commission rate in New York for each Executor is as follows:

  • 5% on the first $100,000 in the estate;
  • 4% on the next $200,000;
  • 3% on the next $700,000;
  • 2-1/2 % on the next $4,000,000; and
  • 2% on any amount above $5,000,000.

If a Bank or Trust company is appointed Executor and/or Trustee, it may charge more for its services as Executor and/or Trustee, and as money managers.

Commissions received by a fiduciary of an estate or trust (e.g., executor, administrator, or trustee) are taxable as income in the year in which the fiduciary receives the commissions. However, funds received by a beneficiary are not considered taxable income. So, you should discuss the tax implications of commissions with your tax advisor before accepting any commissions.

Russo Law Group, P.C.
100 Quentin Roosevelt Blvd., Suite 102
Garden City, NY 11530

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