09 Mar How much of an executor commission can I get?

Q. When Mom died, I was named executor. Her home is worth $ million. Her will says 70% of her home’s value goes to me and 30% is to be equally distributed to three siblings. If I buy out the three siblings, paying them $300,000, how is the executor commission calculated? On the $1 million or the $300,000?
— Executor

A. We’re sorry to hear about your mom.

Your first step should be to carefully review the terms of your mother’s will, paying particularly close attention to the language relating to executor commissions.

Keep an eye out for language explicitly providing that individual executors are not entitled to executor commissions, said Samantha Rocco, an attorney with Einhorn. Barbarito, Frost & Botwinick in Denville.

If no provision barring executor commissions exists, then generally, under New Jersey law, an executor will be entitled to executor commissions, she said.

Rocco said in New Jersey, executor commissions can be broken down into two categories: the income commission and the corpus commission.

With respect to the income commission, the executor is entitled to a commission equal to 6% of all of the income earned by the estate without prior court review/approval, she said.

With respect to the corpus commission, generally, the executor is entitled to a commission on all corpus — 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.

Rocco said the rules differ if there is more than one executor serving, but based on your question, it sounds like your mother appointed you as the sole executor of her estate.

“Upon an intermediate or final settlement of the executor’s accounts, the courts may allow additional corpus commissions, however, there must be a showing that the executor engaged in unusual or extraordinary services such that the fiduciary should be entitled to extra compensation,” she said. “Likewise, the court could also reduce the fees upon application by a beneficiary if the actual pains, trouble and risk of the executor in settling the estate were substantially less than generally required for estates of comparable size.”

In terms of you buying out the other beneficiaries, if your mother owned the house as tenants by the entirety and her spouse survived her, then the house would pass automatically to her surviving spouse, despite the fact that her will says it passes to you and the siblings, Rocco said.

If your mother owned the house as joint tenants with the right of survivorship with another individual or individuals who survive your mother, then the house would pass to them no matter what the will said, she said.

If either of those is the case, the house will not be part of the “corpus” and you will not be entitled to executor commissions with respect to the house, she said.

Assuming, however, that your mother owned the house in her name alone, then the house will be part of the so-called “corpus.” The commission will be based on the gross value of the estate — the fair market value of $1 million — so in calculating the executor commission, you will not take into account the mortgage, if any, on the house, Rocco said.

“Based on the facts provided, if the house is the sole asset of the estate, then the corpus commission will be $38,000,” she said. “The income commission cannot be calculated based on the facts provided, given that I am not sure whether you and your siblings intend to keep or sell the house, and if you do sell, how you will invest such net proceeds from the sale pending closing of the estate.”

Also note that executor commissions are subject to income tax, Rocco said.

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This story was originally published on March 9, 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.