- Is there a formula that establishes what an Executor can earn?
- Does an Executor get paid extra for extra work?
In New Jersey, the executor of an estate generally earns two commissions. The first is known as the “corpus” commission and is based the total value of the assets in the estate. The second commission is based on the income generated by the estate.
New Jersey statutes – Title 3B – establish that income commission is 6% but corpus commission is set on a variable scale. Corpus commission is currently 5% on the first $200,000; 3.5% on the next $800,000 (up to $1,000,000); 2% on the excess over $1,000,000 and there are adjustments for co-executors.
This math is best explored with a few examples. An estate worth $150,000 would generate a corpus commission of $7,500 or a straight 5% because it is less than $200,000. An estate worth $500,000 would generate a corpus commission of $20,500: $10,000 as 5% for the first $200,000 and $10,500 as 3.5% on the remaining $300,000. An estate worth $1,500,000 would generate a corpus commission as follows:
$10,000 as 5% of the first $200,000;
$28,000 as 3.5% of the next $800,000; and
$10,000 as 2% on the remaining $500,000; totaling
$48,000 as the corpus commission.
Corpus commission, as we know, is calculated from the value of the estate. Specifically, it is the total value of everything that has come into the estate during the executor’s time administrating the estate. If there was a prior executor who resigned, died, fallen ill, etc., after disposing of certain assets, the incoming executor generally cannot claim the value of those assets because those assets would have come “into the hands” of the successor executor. Sometimes, an executor is removed from their role for cause – perhaps a breach of duty, perhaps violating a court order – and so, that removed executor loses their right to claim commissions. The incoming executor or administrator does not automatically take the former executor’s commissions.
Income commission is earned on income, obviously, but defining “income” sometimes causes trouble. One of the common mistakes with pro se executors is the idea that if an estate owns a property worth X and the executor sells it for X, the income commission should be based on that X. The pro se executor will see the check come in from the closing and calculate their 6%. Unfortunately for that executor – but fortunately for the beneficiaries – the value of the property is part of corpus. Whatever “X” was, it was already counted. It is not income.
A common mistake on the beneficiaries’ side is to assume that an executor who has an easy time administering the estate does not deserve any commission. While beneficiaries may make an application to the court to reduce commissions, generally it is a lot of work to administer an estate even if it does not appear that way from the outside. No estate administers itself.
A decedent may also, despite all the above, have left a set rate or formula in the Will itself. In that case, the Will would control.
If you are looking for additional details on this topic or if you require advice about your situation, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
Written by Christopher Balioni, Esq. of Hanlon Niemann & Wright