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3 Things to Know About Executor Commissions

Posted on: October 13th, 2017

Executors’ duties typically require time-intensive efforts throughout the probate process. An executor may be compensated for their job, depending

on the value of the estate, instructions in a will, and statutory provisions. Calculation of executor fees should be handled by a probate attorney prior to the executor’s receipt of commissions. The rules regarding executorcompensation vary by jurisdiction. Also, some estates involve more than one executor, which can affect how commissions are distributed.

When determining an executor’s commissions, consider these matters:

  1. Taxable income. The executor’s commissions are subject to personal income tax and must be reported on the executor’s Form 1040. In some circumstances, such as when the executor is the sole beneficiary of the estate, it may not be in their best interest to take a commission. In many jurisdictions (and depending on the type of assets and titling), assets received as an estate beneficiary are subject to income tax.

  2. Flexible. The commission value is not necessarily a fixed figure. While the testator may have included a rate for the executor’s commission in the will, the amount of the commission will be based upon the value of the estate. If a provision for commission was not included under the will, the executor may request a commission from the court. For instance, in North Carolina the Clerk of Superior Court may grant a commission up to 5 percent of the value of the estate receipts and disbursements. Further, if an executor resigns before settling the estate, they generally surrender their eligibility to request a commission.

  3. Deductible. Executor commissions, among other fiduciary fees, are deductible against the estate’s income on the Form 1041, Income Tax Return for Trusts and Estates.

More about executor commissions, as well as the estate administration process and fiduciary obligations, can be found in our legal library. Request access to our legal library to access an archive of legal guides pertaining to estates, trusts, and tax law.

When determining how much an executor is paid, consider the wide-ranging differences between jurisdictions and the protean nature of state law. Probate counsel can help to address these matters as well as support the executor on other financial and tax aspects of the estate.

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