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What commissions are an Executor or Administrator entitled to?

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 Ira K. Miller & Associates 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

Totaling $2,324,000

 

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

              $2,324,000       $67,100

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 Ira K. Miller & Associates for help regarding the administration or probate of an estate.

Estate Administration

Who has priority to act as Administrator of an Estate?

If a person dies without leaving a Last Will & Testament, that person is said to have died intestate.   To learn more about who would inherit according to intestacy, read “What Happens if I Die without a Will?”   When a person passes away without a will, a person needs to be appointed to marshal the assets of the decedent, pay their liabilities, and distribute the remaining funds to the people who would inherit according to intestacy.  That person is called the administrator of the estate. The administrator is a fiduciary and must act in the best interest of the estate.

The person that has the largest interest in the decedent’s estate according to intestacy has priority in becoming the decedent’s administrator. SCPA 1001 lists the order of priority for granting letters of administration.    For example, a wife that has a 50% interest in their deceased husband’s estate has a higher priority to become administrator than a child that has a 25% interest in their father’s estate.

Problems arise and litigation can occur when multiple individuals with the same priority are requesting to become administrator of an estate.  In this situation, the court will decide as to whom should be appointed as the fiduciary.   A person with a higher priority may not be appointed as administrator if there are objection and the proposed administrator may be unfit to serve as administrator.

Daredevil Dan Example:

Daredevil Dan, our crash test dummy, decided to go snowboarding in upstate New York.  Unfortunately, Daredevil Dan was going too fast and snowboarded straight off a cliff, and that was the end of Daredevil Dan.  Daredevil Dan never made it to Ira K. Miller & Associates and died without a Last Will & Testament. Daredevil Dan died leaving a wife and three children.  According to SCPA 1001 Daredevil Dan’s wife would have priority to act as administrator.  If Daredevil Dan’s wife predeceased him, his three children would have equal priority to becoming the administrator of his estate.

 

Contact Ira K. Miller & Associates for any questions you may have regarding Probate and Administration.