Being an executor is hard work.  Being an executor involves assuming a lot of liability.  As executor, you are handling other people’s assets and you are responsible to handle those assets with the utmost care.  If, for instance, you, as executor, continue to hold a stock the decedent owned and that stock drops in value significantly, the beneficiaries of the estate might sue you for failing to invest the assets of the estate in a prudent manner.

Being an executor is also a job with little reward.  The beneficiaries of the estate frequently believe that they could handle the estate better than the executor and second-guess the actions of the executor with regularity.

So, why shouldn’t the executor receive compensation for his services?  A lot of work and a lot of liability warrant payment for services rendered.

An executor is entitled to a declining percentage of the estate as compensation for his services.  He is entitled to 5% of the first $200,000 of the estate, 3.5% of the value of the estate above $200,000 up to $1,000,000, and 2% of the value of the estate in excess of $1,000,000.  In addition, the executor is entitled to a commission of 6% of the income of the estate.

So, assume that Mr. Smith dies having an estate worth $600,000.  During the administration of his estate, his estate assets generate $20,000 of income from dividends and interest.

Generally speaking, the executor of Mr. Smith estate would be entitled to a commission of 5% of the first $200,000, or $10,000, and 3.5% of the remaining $400,000, or $14,000, for a total commission on the assets of the estate of $24,000.  The commission is based upon the value of the assets that the executor receives.  The New Jersey courts frequently say that the executor is entitled to a commission based upon the value of the assets that come into the executor’s hands.

In addition, Mr. Smith would be entitled to an income commission of 6% of the income the estate earned, or $1,200.  In this case, the executor’s total commission would be $15,200.

Now, I used the phrase “generally speaking” because in certain cases, the executor is not entitled to a commission on a portion of the assets that the decedent owned.  Assume that Mr. Smith specifically devised his house to his daughter.  Assume that his Will provides as follows:  “I give my home to my daughter Julia.”

Let’s say that of the $600,000 in assets, Mr. Smith’s home, which he specifically devised to his daughter Julia, is worth $300,000.  Because Mr. Smith specifically devised his home to his daughter, our courts say that the executor is not entitled to a commission on the value of the home.

According to the courts, because Mr. Smith specifically devised the home, the home passed to the daughter immediately upon Mr. Smith’s death, so the home never “came into the hands” of the executor.  For this reason, the executor is not entitled to a commission on the value of the house.

In this case, the executor would only be entitled to a commission of $13,500, or 5% of the first $200,000 and 3.5% of the remaining $100,000.

The executor also cannot use the assets of the estate to pay for the cost of maintaining the home, because the home is not an asset of the estate.  The home immediately became the property of the daughter upon Mr. Smith’s death, so the daughter must immediately assume responsibility for the home.

The executor assumes no liability with regard to the home because the home passed to the daughter immediately.  The executor’s only responsibility is to sign the deed transferring title to the daughter.

Serving as an executor carries important responsibilities. Understanding the rules regarding compensation helps set reasonable expectations for everyone involved.