An Executor or Administrator of a decedent’s estate is entitled to a commission. The job of the Executor or Administrator is to gather all the assets of the decedent, pay the liabilities, and distribute the funds according to the decedent’s Last Will & Testament or according to the intestacy rules of New York. The executor or administrator’s commission is based off the size of the estate.
Assets Excluded from Computing Commissions
Certain assets are excluded in calculating the executor’s commission. Assets not included in the executor’s commission are:
- Testamentary Substitutes- Assets that pass outside of the estate and have beneficiaries listed. These assets include, in trust for (ITF) accounts, payable on death accounts (P.O.D.), assets with rights of survivorship, or joint accounts.
- Real Estate not sold by the Executor
- Specific bequests- for example, my gold Rolex watch to my son, Jimmy.
How Commissions are Calculated
Commissions for executors and administrators are codified in SCPA 2307. Executor and Administrator fees are calculated as follows:
- For receiving and paying out all sums of money not exceeding $100,000 at the rate of 5 percent.
- For receiving and paying out any additional sums not exceeding $200,000 at the rate of 4 percent
- For receiving and paying out any additional sums not exceeding $700,000 at the rate of 3 percent.
- For receiving and paying out any additional sums not exceeding $4,000,000 at the rate of 2 1/2 percent.
- For receiving and paying out all sums above $5,000,000 at the rate of 2 percent.
Executors are also entitled to 5% of gross rents received on behalf of the estate.
Executors Commissions/Fees count as Taxable Income
Executors should be aware that executor’s commissions are considered taxable income. However, inheriting property from an estate is not considered income. If the executor is a sole beneficiary, they could waive their commissions and receive their funds as an inheritance and not have to pay income taxes.
Daredevil Dan Example
On December 4, 2015, Daredevil Dan went to Miller & Miller Law Group PLLC and executed a Last Will & Testament. The Last Will & Testament left Daredevil Dan’s watch collection to his friend, Ryan. The remainder of his estate was to be left equally between his son Jeremy, his daughter, Jenny, and his friend Brian. He made Jeremy the executor of his will.
On March 26, 2016, Daredevil Dan tried to recreate Houdini’s famous water escape, unfortunately Daredevil Dan was not very good at picking locks, and that was the end of Daredevil Dan.
Daredevil Dan passed away with the following assets:
- A joint bank account worth $20,000 with Ryan listed as the joint owner
- A 2 family home in Cobble Hill, Brooklyn worth $2,100,000. Daredevil Dan rented the top floor of his home for $3,000 a month.
- A bank account with $200,000 solely in Daredevil Dan’s name and
- A watch collection worth $30,000.
What assets of Daredevil Dan’s are commissionable to Jeremy as executor?
- He would not be entitled to any commissions for the joint bank account with Ryan. Ryan would become the sole owner of the $20,000 of the account after Daredevil Dan’s passing
- Jeremy would only be entitled to commissions if he sold the Cobble Hill property. For this example we will assume Jeremy sold the property for $2,100,000. He also collected rent from the tenant on behalf of the estate for eight (8) months at $3,000 a month totaling $24,000 collected in rent.
- Jeremy would be entitled to commissions from the $200,000 bank account marshaled.
- Jeremy would not be entitled to any commissions on the watch collection and would turn the watch collection over to Ryan.
The size of Daredevil Dan’s estate would be as follows:
-$2,100,000 for the sale of the Cobble Hill property
-$24,000 in Income from the upstairs Tenant and
-$200,000 from Daredevil Dan’s bank account
According to SCPA 2307, Jeremy’s commissions would be
5% of $100,000 = $5,000
4% of $200,000 = $8,000
3% of $700,000 = $21,000
2.5% of $1,324,000 = $33,100
Estimated Total Commission for Jeremy as Executor of Daredevil Dan’s Estate: $67,100.00
Jeremy would also be entitled to 5% of the $24,000 in rent collected = $1,200.00
Jeremy’s full executor’s commission would equal $68,300.00. If Jeremy were to take his executor’s commission, this would be taxable to Jeremy and must be included on his income tax return for the year.
As illustrated above, there are many intricacies in calculating an executor’s commission and administering a decedent’s estate. Contact Miller & Miller Law Group PLLC for help regarding the administration or probate of an estate.