Being named as executor in the will of a family member, friend or client can be a compliment and a heavy responsibility.
On the one hand, naming you executor shows that the testator trusted you to give effect to the will and finalise the deceased estate. On the other hand, it confers an onerous duty to act in the best interests of beneficiaries to collect, preserve, protect, realise and ultimately distribute the estate assets; pay estate debts; finalise tax affairs; and give effect to other wishes of the testator.
Executors will usually be required to apply for probate of the will; be appointed as legal personal representative for the purpose of dealing in the testator’s real estate; and may be named in any court proceedings arising in respect of the estate.
The extent of time, effort, expense and emotional toll associated with being an executor can vary significantly with the size and complexity of the estate; the approach taken by beneficiaries; whether there is a dispute over the will or estate generally; and whether you engage a lawyer and other professionals to assist. Reasonable professional costs can often be reimbursed from the estate.
Traditionally, the role of executor is honorary and while you are usually entitled to reimbursement for reasonably incurred expenses, there is no automatic right to payment for time and effort.
A will can provide for payment, usually a commission or percentage amount, for an executor. Where there is no provision for this in a will, it may be possible to reach agreement with beneficiaries for a payment. It is also possible to apply to a court for payment of commission.
The Administration and Probate Act 1958 (Vic) provides that a court may allow payment of commission for the executor’s ‘pains and trouble’ it finds just and reasonable. In this context, ‘pains’ refers to responsibility, anxiety and worry arising from the role and ‘trouble’ to the work done in the role of executor. A court may allow up to the lesser of:
- Five per cent of the value of the estate; or
- The percentage or commission a licensed trustee company may charge under chapter 5D of the Corporations Act 2001 (Cth).
The power to allow a commission is discretionary. A court will rarely allow the maximum, but will look at what is reasonable in light of the pains and trouble incurred and may take into account whether you are also a beneficiary receiving financial benefit. Different commissions may be allowed for different assets and income realised in the estate. If you are an executor also providing professional services and charging a fee, for example, for accountancy, business administration, property management or legal services, commission may be awarded only on pains and trouble beyond professional services you provide for a fee.
When deciding whether to accept the responsibility of being an executor and if the possibility of receiving payment for your efforts is a consideration, it is important to check for any provision for commission in the will. If appropriate, also consider seeking the agreement of beneficiaries. You may also wish to seek professional advice on whether an application for a court order for commission is viable.