16 Mar How do we pay an executor commission fairly among beneficiaries?

Q. Our mom passed away, leaving her house to A. She left all her other assets to B, C and D. The house is appraised at $400,000. The total value of the other assets is also $400,000. All the beneficiaries are Class A. A will get the house with no money while B, C, and D will divide the cash equally. B is the executor. How does A pay funds towards the executor fee?
— Beneficiary

A. We’re sorry to hear about the loss of your mother.

Let’s first review how executor fees work.

There’s an income commission and a corpus commission.

With the income commission, the executor is entitled to 6% of all of the income earned by the estate.

That may not be very much if the estate is closed out quickly.

But for the corpus commission, generally, the executor can get a cut of all assets held by the estate as follows: 5% on the first $200,000 of all corpus received by the executor; 3.5% on the excess over $200,000 up to $1 million, and 2% on the excess over $1 million.

In your case, where a house is specifically bequeathed to a beneficiary, it does not come into the hands of the executor, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

So the house will pass directly to the beneficiary, though the executor may be asked to execute the deed to the beneficiary on behalf of the estate, Romania said.

“Moreover, the regulations provide that the executor’s or administrator’s commissions are only allowed on real estate that is actually sold by the executor or administrator or which is expressly directed to be sold by the terms of the decedent’s will,” she said.

For those reasons, a commission is generally not calculated on the value of the real property specifically bequeathed but only on the remaining assets and, as such, absent direction in the will otherwise, it is also only paid from the remaining assets, she said.

But if the other beneficiaries don’t love the idea that you won’t have to pay into the executor commission, beneficiaries can always agree to a different division, Romania said.

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This story was originally published on March 11, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.