Executor Compensation in New York: Explanation and Calculator

An executor or administrator in New York is paid commissions fixed by statute, SCPA 2307, as a percentage of the estate they handle.

The calculator applies the scale to the value you enter. What to enter, and what the result does and does not include, is explained below.

The result is the total commission on the value entered. On an accounting it is shown in two halves, one for receiving and one for paying out, and on estates with more than one fiduciary it may be multiplied or shared as described below. This page is part of our section on trust and estate accountings, because commissions are computed and approved on the accounting and are the single most common objection to one.

How the Scale Works

The rates are marginal, like income tax brackets: each rate applies only to the slice of the estate within its band. An estate of $300,000 earns 5% of the first $100,000 ($5,000) plus 4% of the next $200,000 ($8,000), a total of $13,000, not 4% of $300,000. An estate of $1,000,000 earns $5,000 plus $8,000 plus 3% of $700,000 ($21,000), a total of $34,000. An estate of $5,000,000 earns $34,000 plus 2.5% of $4,000,000 ($100,000), a total of $134,000, and anything above that earns 2%.

Receiving and Paying Out

The statute awards half of the commission for receiving the estate’s property and half for paying it out. The two halves are computed separately, on the sums actually received and the sums actually paid, and in an ordinary estate they are the same because everything received is eventually paid out. They diverge when they should: an executor who collected the assets but resigned before distributing them earns the receiving half only, and a successor who distributed what the predecessor collected earns the paying-out half. Income earned during administration (interest, dividends, rent) is commissionable as well as principal. On the accounting, Schedule I shows the computation in this form, and a beneficiary can check each half against Schedules A, A-1, A-2, C, D and E.

What Is Commissionable and What Is Not

The rule of thumb is that the fiduciary is paid on what passes through their hands. Commissionable: bank and brokerage accounts in the decedent’s name, real property that the executor sells and whose proceeds the executor distributes, business interests liquidated by the estate, income collected, refunds and recoveries. Three things are not.

Real property specifically devised. A house left to a named person passes to that person directly; the executor does not receive or pay it out and earns nothing on it, even if the executor signs the deed. If the will directs the executor to sell it and distribute the proceeds, the proceeds are commissionable.

Specific bequests of other property. The same rule for a specifically bequeathed account, painting or car delivered in kind.

Property passing outside the estate. Joint accounts, accounts with named beneficiaries, life insurance payable to individuals, retirement accounts with designated beneficiaries, and property in a living trust. The executor may have to report them for estate tax, but did not administer them.

Objections to commissions are most often that they were computed on the gross estate for tax purposes, which includes all of these, rather than on the probate estate the executor actually handled. The calculator above does not know what kind of assets you entered; enter only the commissionable ones.

An executor who is required to collect the rents of and manage real property held by the estate is allowed an additional 5% of the gross rents collected, and only one such commission regardless of the number of fiduciaries. The value of property received or distributed in kind counts as money for commission purposes, so an executor who distributes securities in kind rather than selling them is still paid on them. An executor who held successive letters on the same estate, for example as temporary administrator and then as administrator, is entitled to one full commission in total, not one for each capacity.

More Than One Executor

The statute limits how many full commissions an estate pays. Where the estate is less than $100,000, one commission is shared among all the fiduciaries. Where the estate is $100,000 or more but less than $300,000, each of up to two fiduciaries takes a full commission, and if there are more than two, two full commissions are shared. Where the estate is $300,000 or more, each of up to three fiduciaries takes a full commission, and if there are more than three, three full commissions are shared. Sharing is according to the services each rendered, unless the fiduciaries agree in writing to a different split, and no agreement can give any one of them more than one full commission.

Two executors of a $2,000,000 estate therefore each take the full commission of $59,000; two executors of a $90,000 estate share $4,500 between them. A will that names three children as co-executors of a large estate has, perhaps unintentionally, tripled the cost of administration, which is a reason to think about it when the will is drafted and a reason beneficiaries check the count on the accounting.

Waiver of Commissions

An executor may waive commissions, and family members often do, especially where the executor is also the sole or principal beneficiary. The reason is tax: commissions are taxable income to the executor, whereas an inheritance is not, so an executor who is the only beneficiary pays income tax on the commission and receives the rest anyway. Where the executor is one of several equal beneficiaries the arithmetic is different, because the commission comes off the top before the shares are computed and so is paid partly by the siblings. Whether to waive is a decision to make with a tax adviser before the commission is taken; a waiver should be in writing, and once the commission has been paid it is income whether or not it is later returned.

Taxability

Commissions are compensation for services and are taxable income to the executor in the year received, reported on the executor’s personal return. The estate deducts them as an administration expense on its fiduciary income tax return or, if the estate is taxable, on the estate tax return, but not both. An executor who takes commissions should expect a tax bill and should not confuse the commission with a distribution.

The Attorney-Executor: SCPA 2307-a

When the lawyer who drafted the will, or a lawyer in that firm, is named as executor, the statute requires a written disclosure to the testator, signed and acknowledged, explaining that the executor is entitled to commissions and that the lawyer who serves as executor may also be paid legal fees. If the disclosure was not obtained, the attorney-executor’s commissions are reduced to one-half of what they would otherwise be. The disclosure is filed with the probate petition, and its absence is checked by the court and by beneficiaries who read the accounting. An attorney-executor who also acts as the estate’s lawyer is paid commissions for the executor’s work and fees for the legal work, and must not charge legal fees for what an executor would do.

The Will Can Change the Statute

SCPA 2307 supplies the rule where the will is silent. A will can direct that the executor serve without commissions, fix a different amount or percentage, or provide a bequest in lieu of commissions. Where the will provides specific compensation, the executor takes that and not the statutory commission, unless the executor renounces the will’s provision by an instrument filed with the court within four months of the issuance of letters. A corporate executor may be paid under its published fee schedule if the will so provides or it has agreed to specific rates. Most wills say nothing, and the statute applies; but before computing anything, read the will.

When Commissions Are Taken

Commissions are earned over the administration but are ordinarily taken at the end, on the accounting. The computation appears on Schedule I; the beneficiaries see it, sign receipts and releases that include their consent to it, or the court approves it in the decree; and the executor then pays it. Commissions may be taken earlier in two ways: with the written consent of all the beneficiaries whose shares bear them, or with the court’s approval on an application for advance commissions, which the court grants where the executor has done substantial work, the estate can afford it, and the beneficiaries’ interests are protected. What an executor should not do is take commissions along the way without either. Commissions taken early without authority are not theft, but they are objectionable, and a court can charge the executor interest on them for the period they were held before the account was settled, and in a bad case deny them.

How Objections to Commissions Arise

Commissions are contested more often than any other item on an accounting, because every beneficiary can do the arithmetic.

Objections are filed under SCPA 2209 by the return date of the citation on a judicial accounting; on an informal accounting the beneficiary simply declines to sign the release until the computation is corrected. See objecting to an accounting, and for the fiduciary’s side, defending an accounting. Trustees are paid on a different scale, described on our page on trustee commissions under SCPA 2309, and legal fees paid from the estate are reviewed separately under SCPA 2110.

Pitfalls

The mistakes we see most often are simple ones. An executor enters the gross estate in the calculator, house and life insurance included, and takes the result. An executor takes commissions a year into the administration without written consent or a court order. An executor who is also a beneficiary takes the commission, pays income tax on it, and only then learns that a waiver would have left the family better off; the waiver has to come before payment. A drafting attorney serves as executor without the 2307-a disclosure on file and claims a full commission. And an accounting states the commission as a lump sum without Schedule I, which draws an objection whether or not the number is right.

If you are an executor or administrator computing your commissions, or a beneficiary who thinks the commission on an accounting is wrong, call 212-233-1233 or email [email protected]. We prepare the accounting on which the commission is fixed and, where needed, the objections to it, in the Surrogate’s Courts of New York City, Long Island and Westchester. See also how to prepare a New York estate accounting.