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How to Calculate Executor or Administrator Commissions under New York SCPA 2307

How to Calculate Executor or Administrator Commissions in New York SCPA 2307

Serving as a fiduciary of an estate can be a full time job. There are obvious benefits, such as calling the shots, and being compensated for your role. However, despite the number of valuable services an executor may provide to the estate, the risk is always there for an executor to be sued in Surrogate’s Court for alleged breach of fiduciary duty and the legality of executor commissions and/or compensation.

The law is sympathetic to a fiduciary of a New York estate – whether it be an administrator (no will) or an executor (decedent died with a will) – by entitling the representative to compensation a/k/a commissions. Commissions of estate fiduciaries (including trustees) are controlled and authorized by the New York SCPA 2307 which contains the statutory rate of commissions and defines which estate assets are included in the calculation.

Rule

Absent an agreement to the contrary, an executor is entitled to a statutory commission. A decedent is always free to limit or eliminate the executor’s compensation in his will. For instance, if the language in the decedent’s last will and testament stipulates that the nominated executor is entitled to only $5,000.00 for his or her duties, the fiduciary’s compensation is limited to that amount. Furthermore, the executor is free to waive her right to commissions or agree to accept a set sum or lesser sum than allowed by New York SCPA 2307 statute. To avoid disputes later on, any alternate arrangement concerning executor commissions should be reduced to writing. If the will is silent on this topic, the appointed estate fiduciary is entitled to statutory commissions.

Calculation

If the will designates an executor but makes no mention how his or her compensation is to be determined, the calculation is as follows:

(a) For all sums of money not more than $100,000 the executor receives and pays out at the rate of 5 percent;

(b) For all sums of money not more than $200,000.00 the executor receives and pays out at the rate of 4 percent;

(c) For all sums of money not more than $700,000.00 the executor receives and pays out at the rate of 3 percent;

(d) For all sums of money not more than $4,000,000.00 the executor receives and pays out at the rate of 2.5 percent;

(e) For all sums of money above $ 5,000,000.00 at the rate of 2 percent.

Consider two examples:

Example 1:

For an estate valued at $500,000, the fiduciary’s compensation is calculated as follows:

$100,000 x 5% = $5,000

$200,000 x 4% = $8,000

$200,000 x 3% = $6,000

The total fee due to the Executor is $19,000

Example 2:

For an estate valued at $1,000,000, the fiduciary’s compensation is calculated as follows:

$100,000 x 5% = $5,000

$200,000 x 4% = $8,000

$700,000 x 3% = $21,000

The total fee due to the Executor is $34,000

Is a New York Executor Always Entitled to Commissions?

The executor is not always entitled to compensation. There are a number of instances when an executor is called upon to perform services for the estate with no commission available. Real estate turned over to a beneficiary, efforts made with respect to stock or bonds specifically gifted to a certain beneficiary in the will, are two instances where no commission is awarded to the fiduciary. The general rule is that a bequest of property which is specific in nature is not commissionable by law. The reasoning being is that ownership in the subject property vests in the beneficiary by operation of law at decedent’s death. All that is required of the executor is the transfer of the deed onto the beneficiary’s name (in the case of real estate), or to liquidate and transfer the cash from the decedent’s name to the bank account of a beneficiary (stock transfer).

Consider the two examples:

Example 1:

Johh’s last will and testament provides as follows: I give my house to my two daughters, Anna and Jane. I nominate my son Jason as the executor of my will.

Here, Jason is not entitled to any commissions pertaining to the transfer of the decedent’ house as the property is specifically gifted to the two beneficiaries. In practice, Jason would transfer the deed to the house from to the estate to the two sisters, and as the new owners, they would decide on how they wish to deal with the property (sell or keep).

Example 2:

Johh’s last will and testament provides: I give my house to my four children. I direct my son Jason to sell the house and split the sale proceeds equally among my beneficiaries.

As the will directs the executor to satisfy the disposition in money, the gift becomes a “general” bequest, rather than “specific”, and is therefore commissionable. At the closing of the property, the estate executor is entitled to compensation based on the proceeds realized from the sale of the subject property.

No Need to Track Time

Tracking your time when dealing with an estate in which you are fiduciary, is unnecessary. Whether you hired an estate lawyer to handle all the tasks for you, or you spent hundreds of hours navigating the estate process entirely on your own, you do not need to share your time records with the court or the beneficiaries of the estate. In short, there is no need to keep a time log. As stated above, the payment of commissions to an executor is purely statutory and arithmetic. It bears no resemblance to a quantum meruit. Put simply, executor commissions are based on amounts received and paid out. If the fiduciary liquidates a bank account with a balance of $100,000, the commissions are calculated on this base amount. On the other hand, if despite having performed valuable services in connection with an asset, the asset is neither received nor paid out, there is no commission.

Conclusion

Challenging an executor’s commissions in court can be costly, exhausting and a complete waste of time if you don’t know the law. Before you dive in, consult with a New York City probate lawyer first. An estate attorney can request an informal accounting, crunch the numbers, and advise you whether anything is off. Call us at 646-233-0826 if you are a New York executor or a beneficiary who needs to inquire into the actions of a fiduciary.

 

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