Are you an executor of a Will? If so, you should understand that this role involves risks, including personal liability for the expenses of administering the estate.
In addition, you may be entitled to commission for your “handy work” in administering the deceased’s estate. Therefore, it is important to understand how commission is determined. This helps ensure you receive a fair and correct amount.
Can an executor of a Will receive commission?
An executor of a Will can charge a reasonable commission for administering the assets of the deceased’s estate. However, executors are not automatically entitled to commission for their work.
Instead, they must apply for commission to the Supreme Court under the relevant provisions in their jurisdiction.
Alternatively, if all residual beneficiaries of the Will are adults, they may agree on the amount of commission to be paid. This agreement should be in writing and signed by all beneficiaries.
How is commission determined?
Generally, the Supreme Court determines the amount of commission paid to an executor. It considers several factors when making this decision, including:
- the size of the deceased’s estate;
- the type of care and responsibilities required of the executor;
- the amount of time the executor has spent performing their duties;
- the care and diligence shown by the executor in performing their duties.
Typically, commission may range from 1% to 3% of the estate’s net assets. For example, an estate may be worth $1.5 million.
After property sale, mortgage repayment, funeral costs, and administration expenses, $1 million may remain in the estate. In this case, the executor may receive between $10,000 and $30,000 in commission.
If an executor is also a beneficiary under the Will, they may still claim commission. However, the Court will consider what has already been left to them.
It will then adjust any commission accordingly if it considers it appropriate.
To ensure you receive a fair amount of commission for acting as executor, we recommend speaking with one of our experienced lawyers.
Personal liability
Executors must comply with the terms of the Will and relevant legislation when administering an estate.
One of the most commonly overlooked duties involves managing the deceased’s tax affairs. If an executor fails to meet these obligations, they may become personally liable for outstanding tax debts.
For this reason, we strongly recommend obtaining legal and accounting advice at an early stage.
What is involved in finalising a deceased’s tax affairs?
The executor must notify the Australian Taxation Office (ATO) of the deceased’s death. They must also arrange for any outstanding tax returns to be prepared and lodged.
In addition, the executor must arrange for a final tax return for the deceased to be completed and lodged. They must also ensure any tax liabilities are paid.
These obligations can become more complex if the deceased had interests in companies or trusts. They may also be more difficult if the deceased operated a business or was involved in a self-managed superannuation fund.
Executors should also understand that estate tax obligations differ from the deceased’s personal tax affairs. Estates are treated as trusts for tax purposes.
As a result, the executor should:
- obtain a tax file number for the estate;
- ensure tax returns are prepared and lodged with the ATO; and
- ensure payment of any tax liabilities.
These tasks can take a significant amount of time. This is because the executor must collect information and documents to finalise the deceased’s tax affairs.
The process can be even more difficult if the deceased left incomplete records, had multiple outstanding returns, or did not use an accountant.
Conclusion
Executors should seek legal and accounting advice when administering an estate. This helps reduce the risk of personal liability for unpaid tax debts.
An experienced lawyer can assist with the proper administration of the estate. They can also advise on whether the executor is entitled to commission for their work.
This information is general only, and you should obtain professional advice relevant to your circumstances.
If you or someone you know wants more information or needs help or advice, please contact us on 07 5576 9999 or email [email protected].
