This article was originally written by Tatiana Holguin and has been updated to reflect the current legislation in Victoria.
Appointing an executor of an estate is a significant decision. An executor is a person appointed by a will to carry out the will maker’s wishes. Often, an executor is a person that the will maker trusts, such as a spouse, parent, child, friend or solicitor. Being an executor is often a challenging role.
The duties of an executor include, but are not limited to:
- The duty to locate and identify the last will;
- The duty to dispose of a deceased’s body and arrange a funeral;
- The duty to identify the nature and extent of a deceased’s assets and liabilities;
- The duty to identify beneficiaries and inform them of their beneficial entitlement;
- The duty to bring in the assets of the estate and to pay liabilities; and
- The duty to uphold the terms of the will, and to administer the estate in accordance with those terms.
Given the time and effort it takes to handle the estate, it raises the question: can executors be paid?
Executor commission
While there is no guarantee that an executor will be paid, certain circumstances allow for compensation, commonly referred to as executor commission. In Victoria, the Administration and Probate Act 1958 (Vic)(“the Act”) outlines the provisions for compensating executors. This Act ensures executors can be fairly paid for their duties. There are three (3) ways an executor can be paid:
- Remuneration clause in a will;
- Consent by beneficiaries; or
- Application to the Court.
Remuneration clause in a will
The testator can include a remuneration clause in their will, specifying the compensation for the executor. This compensation can be a fixed sum or a percentage of the estate’s value.
For wills made on or after 1 November 2017, the testator must provide written informed consent for the inclusion of the remuneration clause. If this consent cannot be established, the clause may be deemed invalid, and the executor may not be able to rely on it for commission.
Consent of the Beneficiaries
In the absence of a remuneration clause in the will, the executor may negotiate a commission agreement with the beneficiaries under section 65C of the Act. All beneficiaries must have full legal capacity (over 18 years old and not affected by any disability impairing their ability to consent) and provide informed consent.
According to section 65D of the Act, the executor must provide beneficiaries with the following information:
- The basis on which the executor is to be paid;
- The method of calculation of the payment, either as a commission or percentage of the assets of the assets;
- The estimated value of the payment to be made to the executor; and
- The right of any interested beneficiary to review the payment claimed or charged by the executor.
The interested beneficiary also has the right to review the payment claimed or charged by the executor by the Court. If an executor fails to provide this information, they may not be entitled to receive payment.
Application to the Court
An executor may make an application to the Court, where there is no remuneration clause and where the interested beneficiaries have either not provided their informed consent or are unable to do so.
The executor must provide a formal estate accounts and an affidavit detailing the work performed by the executor.
As with all Court applications, there is no guarantee of success and any decisions made, including as to payments of the cost of the application, are at the discretion of the Court.
The Court, pursuant to section 65 of the Act, may provide commission for “pains and troubles” an executor has endured. Pain refers to the responsibility, anxiety and worry of the executor, whereas trouble refers to the actual work done. It is important to note, that the Court will only award commission only for work done to date and not for future pains and trouble.
When deciding the amount of commission, the Court will take into account the “pains and trouble” incurred by an executor, while considering the following factors:
- The size and complexity of the estate;
- The complexity of the terms of the will or scheme of distribution under the will;
- The degree of promptness, efficiency and diligence shown by the executor or administrator in completing tasks;
- The number of routine and complex tasks to be undertaken to disburse the estate;
- The amount of work carried out and time spent;
- The amount of responsibility involved, which may be ongoing;
- Problems encountered in the course of administering the estate; and
- The number of executors sharing the load of managing the estate.
In Victoria, the legislation states that an executor is entitled to commission “not exceeding 5%” of the estate. Typically, the Court will award commission of between 1% and 3.5%.
It is important to note that prior to making an application to the Court, an executor should obtain independent taxation and account advice in relation to seeking commission out of the estate.
Practical Considerations
From a matter of practicality, it is important to keep detailed records of all tasks performed, time spent, and any expenses incurred in administering the estate. These records are necessary when applying for commission.
The information provided in this article is general advice only. Given that each situation is unique, If you would like to discuss how to insert a remuneration clause in your will, how to negotiate a commission agreement with the beneficiaries or how to make an application to the Supreme Court for commission, please contact our wills and estates planning team. Our team can be contacted on (03) 9311 8911.
