Executors Of An Estate: Can They Be Paid And How Does It Work?
An executor of an estate is someone appointed by the Will maker to administer their estate. This involves collecting assets of the estate, paying any taxes and debts of the deceased, and then distributing the remainder of the deceased estate according to the terms of the Will. Being an executor of an estate can be a challenging and time-consuming task.
The executor’s commission is a commission awarded to the executor for their role in administrating the deceased estate. This includes the pains and troubles that they may have suffered by taking on this responsibility.
This commission can be paid to the executor of an estate if certain requirements are met. It is not an automatic right. If an executor is a beneficiary under the Will that they are administering, then it is very rare that the Supreme Court will also award executor’s commission. It is the court’s view that being a beneficiary is sufficient and therefore no commission is needed in most cases.
Changes that have occurred for executors of an estate
Recent changes to the Administration and Probate Act 1953 (Act) have made it clearer as to the prerequisite conditions that need to be met for an executor to claim commission. These conditions are:
- In the Will that the executor is administrating there is a clause that states they are granted a commission; or
- An order is made by the Supreme Court of Victoria for the executors ‘pains and troubles’; or
- The beneficiaries in the Will give the executor fully informed consent to receive a commission.
Condition 1 is the simplest way to ensure that the executor receives payment. This clause ensures that the beneficiaries under the Will know that it was the Will maker’s intention for the executor to receive payment for the role they played in administrating the Will.
Condition 2 means that the executor will need to obtain an order from the Court to receive up to 5% of the estate for their ‘pain’ and ‘troubles’. ‘Pains’ are defined as the emotional worries and stresses of the executor carrying out their duties and ‘troubles’ being the actual work that they carried out. The court must consider many factors when deciding whether the executor should be paid and how much compensation they should receive. It is very rare that the Supreme Court would award 5% executor’s commission; the maximum amount in the majority of cases is 3%.
Condition 3 obtaining the consent of the beneficiaries is only effective if all beneficiaries are adults and they all give fully informed consent. There is a list of things that the executor needs to make sure is completed to satisfy the condition for the beneficiaries to be informed. In a recent Victorian case, an agreement between the executor and beneficiaries was overturned by the Court due to a lack of information being given to the beneficiaries before the agreement was reached.
The changes to the Act outline that an executor claiming executor’s commission under one of the three conditions need to provide each beneficiary with certain information as soon as they can and in a language or form that each beneficiary will be able to understand. The information which must be provided:
- The basis on which they will be receiving the commission (one of the three conditions mentioned above).
- How the payment will be based, whether it is calculated as a commission or percentage of the assets of the estate or by charging a fee.
- The value (estimate) of what they will be receiving in monetary value.
Executors who are claiming the compensation also have the obligation to disclose to the beneficiaries of the estate their right to have the claim reviewed by the Court. An executor who fails to comply with this is not entitled to claim compensation from the estate.
If you are planning to draft a Will, please speak to Grant Mackenzie regarding the executor’s commission. If you are an executor of a Will and believe you are entitled to executor’s commission, please contact Phillips and Wilkins for advice on how to proceed with your claim.
Grant has been a partner at Phillips & Wilkins since 1990 having joined the firm in 1983. Grant enjoys playing competitive bridge and has been a St Kilda supporter for more years than he cares to admit.