My own layman’s guide, born of my own experience and observations – Part 8
By now, you should realize that settling an estate takes a lot of work. This is why the estate can compensate the executor for doing the job. Of course, by executor, the law also includes executrix, as well as administrator and/or administratix.
BUT, it may be that the will specifically forbids payment to the executor/executrix. Why would the will forbid this payment? Hard to say. Could be that Great-aunt Bunny really wanted the ‘stuff’ to be divvied up a certain way, or just didn’t realize it would be so much work. Also note, if you are the executor as well as a fellow-heir, the other heirs may not realize the amount of work, (or believe it should be a labor of love,) and your fees could start (or contribute to) a family feud.
If the will states that you are the executor, and you don’t want the job, you are free to say no. The will should have an alternate. If all the alternates say no, the court (Surrogate’s office) will take over and appoint someone. No one can force you to accept this responsibility.
But if you do take on this responsibility, in most cases, you can earn the fee, which is sometimes called a commission.
It is possible that a will could specifically state a particular amount. Many wills just allow the executor/executrix to use NJ’s schedule. When there is no will, and the estate is handled by an administrator/administratrix, NJ’s schedule is used.
NJ’s basic calculation is as follows:
5% Of the first $200,000 in corpus
3.5% Of the next $800,000 in corpus
2% Of corpus over $1,000,000
6% Of annual income
The 6% on annual income is frequently waived. If an estate is open for a long time, sometimes considered to be over 3 years, the executor/administrator can petition the court for additional fees. If there are multiple executors, an additional 1% of corpus can be included, but the total commission is expected to be divided between all the executors equitably. And so on. (Consult your attorney!)
And just what comprises this corpus? It is best explained by pointing out the excluded items. Some assets pass through the will (probate assets) and some pass outside of the will (non-probate assets.) Non-probate assets include life insurance and retirement accounts that pay out directly to a beneficiary, even if that beneficiary is also an heir, as well as certain assets that were jointly owned with someone else. Probate assets are corpus, and include everything else. Thus, the rule of thumb is, corpus includes assets that the executor/administrator has to handle.
By the way, these fees are taxable income to the executor/administrator! If the executor/administrator is a professional, these fees are also subject to self-employment tax.