Does Estate Administrator Commission Come Out of the Gross Estate in New York?

In New York an estate administrator’s commission comes out of the gross estate, not the net estate. The administrator is not expected to work for free; the compensation, called commissions, is set by statute in SCPA 2307 as a sliding scale of percentages of the value the administrator receives and pays out.

Here is our interactive calculator for how much an estate administrator is paid in NY out of the gross estate:

The calculator does the math, but you should be able to check it yourself, and the calculation is trickier than people expect. The rates are marginal: each band applies only to the slice of value that falls within it, so the commission accumulates as the estate gets larger.

The statute also requires the commission to be split between receiving and paying out. The total is the same as above, but an accounting lists a “receiving” commission and a “paying out” commission, each half of the total. The split is a holdover from the idea that the fiduciary earned half for taking possession of the assets and half for distributing them; in modern practice it is mostly a matter of presentation, and the administrator’s actual compensation is the sum of both halves.

What Counts Toward the Commission Base

The percentages apply to the value of the estate’s assets that the administrator actually handles, receiving them into the estate and paying them out, plus the income derived from those assets. Bank accounts and cash the administrator collects and either spends on expenses or distributes to beneficiaries count. So do brokerage and investment accounts the administrator liquidates or transfers, real estate the administrator sells and whose proceeds the administrator handles, vehicles, art, jewelry and other personal property the administrator sells, interest, dividends and rent received during the administration, and life insurance or other proceeds payable to the estate.

What Does Not Count

Non-probate assets do not pass through the administrator and do not count: joint accounts with right of survivorship, retirement accounts with named beneficiaries, life insurance with designated beneficiaries, and trust assets. Real estate distributed in kind, directly to a beneficiary without a sale, may not count either, which is counterintuitive because the administrator is usually involved in retitling the property from the decedent to the beneficiaries. The interest earned on that property during administration is included even when the property itself is not. A specific item left to a specific beneficiary and delivered without a sale is generally not commissionable.

The result is that the commission base is often much smaller than the decedent’s total wealth. An estate with $5 million in total assets may have only $1.5 million in probate assets passing through the administrator’s hands, with the rest passing outside probate; the commission is calculated on the $1.5 million, not the $5 million. Because it is not always easy to tell which assets are in and which are out, an administrator is well advised to consult an estate attorney before taking commissions. A preliminary account of the estate will likely be required when applying for an advance commission.

Additional Commissions for Special Activities

Beyond the basic statutory commission, an administrator may be entitled to additional reasonable compensation for particular work. For managing rental property, the administrator receives five percent of gross rentals on top of the basic commission, reflecting the ongoing work of dealing with tenants, collecting rent and maintaining the building. For handling litigation on the estate’s behalf, for substantial tax work such as estate tax returns and audits, and for managing a business owned by the estate during the administration, the court approves additional reasonable compensation. These supplemental commissions are tracked separately and reported in the accounting, and in a complex estate they can add substantially to the total.

Multiple Administrators

When more than one administrator serves, the number of commissions the estate pays depends on its size.

The rule keeps commissions from multiplying every time another administrator is added, and it reflects the reality that several administrators rarely do proportionally more work than one would.

When the Commission Is Paid

The administrator’s commission is usually taken at the end of the administration, when the estate is being closed. The administrator includes it in the accounting, and the beneficiaries either approve it through receipts and releases or object as part of a formal accounting. An advance commission can sometimes be taken during the administration with court approval: the administrator petitions, explains why an advance is appropriate, and the court grants or denies it. Advances are most appropriate in long-running estates where the administrator’s work has been substantial and the eventual full commission is reasonably assured.

Tax Treatment of Commissions

Commissions are taxable income to the administrator, reported on his or her personal return as miscellaneous income, and the estate takes a corresponding deduction. One often-overlooked option is to waive the commission entirely. That can make sense when the administrator is also a beneficiary, because taking the commission converts part of a tax-free inheritance into taxable income. Talking to an accountant before the commission is taken can produce meaningful savings.

Speak With Us

If you need to calculate an administrator’s commission under SCPA 2307, or help with any other part of an estate, contact New York estate attorney Albert Goodwin at [email protected] or 212-233-1233. Executors are paid on the same scale; see our executor compensation page and calculator.