Linda M. Toga of The Law Offices of Linda M. Toga, P.C. is an East Setauket, New York attorney with a general law practice focusing on estate planning, real estate, marital planning, small business services and litigation.
Facts: I am the executor of my uncle’s $700,000 estate. In his Will he states that his executor is entitled to commissions of $10,000.
Questions: Aren’t commissions set by law and, if so, would I receive more or less in commissions under the law?
Answer: You are correct that executor’s commissions are set by law. The percentage of a decedent’s estate that can be paid out in commissions is detailed in the Surrogates Court Procedure Act §2307 (the “SCPA”). However, the SCPA only applies if the decedent did not specifically state in his Will how much of a commission he wanted his executor to receive. Since your uncle directed that his executor was to receive $10,000, the SCPA does not apply. In order to answer to your question about whether you would receive more in commissions if the SCPA was applicable, I need to know what types of assets your uncle owned and how he wanted his estate distributed.
Under the SCPA, commissions are based not on the value of the decedent’s estate but on the value of his probate estate. Although you indicated that your uncle’s assets are worth $700,000, if his assets included non-probate assets such as retirement accounts, life insurance, jointly held property, annuities and/or property held in trust, the value of his estate for purposes of calculating commissions under the SCPA would be less than $700,000. In addition, if the value of his primary residence was included in the $700,000, and under his Will he gave that residence to his children, you would have to deduct the value of the residence from the $700,000 when calculating commissions. You would also have to deduct from the $700,000 the value of property that is passed as a specific bequest. For example, if your uncle owned stock and that stock passed directly to a beneficiary under the Will, the value of that stock would not considered when calculating commissions even though the stock is a probate asset. Because the SCPA precludes executors from receiving commissions based upon the value of non-probate assets and on certain probate assets that pass directly to beneficiaries under the Will, a large estate does not necessarily translate into a large commission.
Getting back to your question about whether you receive more or less in commissions under the SCPA, assuming that your uncle’s assets were all owned by him outright, (his house was not jointly owned, he was the only signatory on his bank accounts and they were not left in trust; his assets were not held in an IRA or 401(k)), and, as executor, you are directed to liquidate/sell everything and distribute the proceeds in accordance with the Will, your commissions under SCPA §2307 would be $25,000. Obviously, in this scenario, the fact that your uncle provided for a $10,000 commission will result in you receiving much less in commissions than you would if SCPA §2307 were applied. If, on the other hand, your uncle’s only probate asset was a bank account with a $100,000 balance, the fact that your uncle provided for a $10,000 commission will result in you receiving twice as much in commissions as you would under the SCPA.
Clearly the types of assets that constitute a decedent’s estate and the manner in which those assets are distributed significantly influence the amount of commissions due the executor. Although most people do not even think about commissions when they think about their estates, not giving consideration to commissions could have unforeseen consequences.
Linda M. Toga, Esq. provides legal services relating to estate planning and probate, as well as in the areas of real estate, small businesses, and litigation from her East Setauket office.
January 2013