Background

Acting as the executor of a deceased estate can be time-consuming and onerous. In the majority of cases, the person appointed as executor is a family member (and often also a beneficiary of the estate) and is happy to take on the role without seeking any payment for their time and effort – which is also referred to as an executor’s “pains and troubles”.

The question of whether an executor should receive payment is one that should be discussed when preparing a will. This is particularly important if the will-maker wishes to appoint a person who practices a profession as executor, as it is usual practice to include a charging clause or similar provision in a will in such circumstances.

However, there is no requirement to provide for the payment of an executor under a will, nor does an executor have an automatic entitlement to be paid and so the issue may also be raised by an executor during the estate administration.

Options to seek commission

If the will does not provide for the executor to be paid, the executor has the following options to seek commission out of the estate:

  1. Obtain the informed consent of the beneficiaries of the estate; or
  2. Make an application to the Court pursuant to section 68 of the Succession Act 1981 (Qld) (Succession Act), which provides “The court may authorise the payment of such remuneration or commission to the personal representative for his or her services as personal representative as it thinks fit, and may attach such conditions to the payment thereof as it thinks fit.”

Informed consent

Seeking the informed consent of all beneficiaries is generally the preferred option in order to avoid the estate potentially incurring significant legal costs and disbursements associated with making an application to the Court. However, for this option to be possible, all affected beneficiaries must be over the age of 18 years and be able to give informed consent – as they will effectively be bearing the payment of any commission out of their estate entitlements.

When submitting a proposal for the payment of commission to the beneficiaries, the executor should ensure they provide details of the work involved in the estate administration, including work that has been performed with the assistance of legal representatives and the nature and extent of work the executor has performed personally. The executor should also inform the beneficiaries they should seek independent legal advice regarding the proposal.

The appropriate time for the executor to send a proposal to the beneficiaries is therefore usually once all estate assets have been collected and all estate expenses and liabilities (including any tax liabilities) have been identified, so the overall position of the estate is known, so the beneficiaries can properly consider a proposal.

Application to the Court

If the executor cannot reach an agreement with the beneficiaries, the only other option is to make an application to the Court.

This option can involve significant additional work, including the preparation of formal estate accounts to present to the Court and comprehensive affidavit material detailing the work the executor has performed and the pains and trouble he/she has incurred as a result of acting as executor.

As with any Court application, there is also no guarantee of success. An application for commission will be carefully considered and scrutinised by the Court before any decision as to whether to order commission is made.  Further, while the costs of an application for commission are usually paid out of the estate, decisions regarding costs are always in the discretion of the Court and so there is always a risk the Court could order the executor to pay the costs personally.

Amount of commission

When deciding the amount of commission to seek (whether in a proposal to the beneficiaries to seek their informed consent or in an application to the Court pursuant to section 68 of the Succession Act), a wide range of factors need to be considered, including:

  1. The nature and number of estate assets dealt with;
  2. The overall value of the estate;
  3. Whether the estate administration has involved complex issues;
  4. The amount of time the executor spent performing their executorial duties;
  5. The work performed by legal representatives;
  6. The level of responsibility of the executor;
  7. Whether the executor performed his/her duties diligently and efficiently and without unexplained delays;
  8. Whether there has been any accumulation of income; and
  9. Whether long-term investment decision-making was required that resulted in increases in the value of the estate for the benefit of the beneficiaries.

Significant commission is more likely to be awarded in instances where there were complex issues involved, claims made against the estate, a protracted estate administration and/or where the long-term involvement and decision-making of the executor was required.

There is no statutory scale or set rules as to how commission is to be calculated. The purpose of commission is to remunerate the executor for the pains and troubles incurred. [1] Generally, commission is assessed in terms of a percentage of the capital and income of the estate – however, the Court will first consider exactly what work the executor has performed and then determine an appropriate level of remuneration for that work, having regard to the circumstances.

Tax implications for executor

It is very important to note that any commission received by a person for acting as executor is considered to be assessable income[2] and must therefore be included in the person’s individual tax return.

We strongly recommended an executor should obtain independent taxation and accounting advice before seeking commission out of the estate.

[1] Jones v Jones & Ors [2020] QSC 6 at 77.

[2] ATO Interpretive Decision ID 2014/44 Income Tax – Income:  Commission paid to executor of deceased estate

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