Estate executor commissions are designed to fairly compensate someone for handling an estate’s administrative burdens. In New Jersey, the law provides a clear formula, but courts can adjust it up or down depending on the effort and circumstances.
Serving as an executor of an estate is an important responsibility — but it can be time-consuming and challenging.
Estate executors handle everything from paying bills and filing taxes to distributing assets and navigating family dynamics. Because of this workload, New Jersey law allows executors to be paid for their services. These payments are called executor commissions.
But how much can an executor receive? How is it taxed? And does every executor have to take a commission? Below is an overview of New Jersey law regarding executor payments, plus some guidance on best practices and a few lessons from real cases.
What Does New Jersey Law Allow Executors to be Paid?
Executor commissions are set by a state statute that outlines how much an executor can receive based on the size of the estate:
- 5% on the first $200,000 of estate assets
- 5% on the next $800,000 (from $200,000 to $1 million)
- 2% on anything above $1 million
If there is more than one executor, the law allows an extra 1% to be added and shared among them. Executors can also earn a separate 6% commission on any income (like dividends or rent) the estate receives during administration.
These are maximum amounts, not automatic entitlements. Courts can reduce the commission if they believe the executor didn’t earn the full amount through their “pains, trouble, and risk.”
Court Cases Clarify Executor Commission Rules
In most estates, the executor’s commission is calculated using these percentages, and beneficiaries rarely object. But when there’s conflict, the probate court can step in to decide whether the full commission is justified.
For example, In re Estate of Summerlyn (2000), the New Jersey Superior Court Appellate Division emphasized that commissions are meant to compensate for work actually done, not just the size of the estate. If an estate is simple and requires little effort, the executor may not be entitled to the full percentage.
On the other hand, when an executor deals with complex assets, tax issues or family disputes, the court can approve the full commission or even grant additional pay for “extraordinary services.”
Executors who act improperly — for example, by delaying administration, failing to account for assets or breaching their duties — can lose some or all of their commission. In a 2020 case, In re Estate of A-5200-17T3, the Appellate Division upheld the denial of commissions for executors who were removed after failing to obey court orders.
Tax Implications for Estate Executors’ Payment
Executor commissions are considered taxable income. That means the executor must report them on their personal income tax return.
If the executor is also a beneficiary (which is common in family estates), it can make sense to waive the commission. In that case, the same amount can often be received as an inheritance instead, which typically isn’t taxed as income.
Executors should weigh the after-tax impact carefully. For example, if you’re the child of the deceased and stand to inherit most of the estate, taking a taxable commission may not increase your net benefit.
For estate and inheritance tax purposes, commissions can sometimes be deducted from the estate’s value, reducing tax liability. However, the New Jersey Division of Taxation limits deductions on real estate commissions unless the property is sold by the executor or directed to be sold in the will.
Can the Will Decide Estate Executor Compensation?
Yes, a will can specify how the executor should be compensated — either a flat amount, a different percentage or even no commission at all. That written direction usually overrides the statute unless it’s clearly unreasonable.
Some wills say, “reasonable compensation,” leaving the amount up to interpretation. Others tie payment to hourly rates or specific milestones. If the will is silent, the statutory formula applies.
Best Practices for Executors
- Keep detailed records: Document your time, tasks and decisions. If a beneficiary challenges your commission, clear records will show that you earned it.
- Communicate early and often: Beneficiaries are less likely to object when they understand the work involved and how the commission is calculated.
- Talk to a tax professional: Before deciding to accept or waive your commission, review how it will affect your personal taxes.
- Know when to seek court approval: In complicated estates or situations involving disputes, it’s best to get the court’s sign-off before taking your commission.
- Avoid conflicts of interest: If you are both executor and attorney for the estate, you can’t simply double bill for the same work. Courts require that fiduciary and legal services be clearly separated.
Serving as an executor is both an honor and a challenge. Knowing the rules, and approaching the job transparently and thoughtfully, can help ensure that the estate is settled efficiently, fairly and with fewer surprises for everyone involved.
If you’re planning your estate, the experienced attorneys at TREEL can help you draft a will that clearly defines your executor’s role, authority and compensation — ensuring the job is handled by someone capable and treated fairly. If you’ve been named as an executor and need guidance on your duties or commissions, contact our estate planning team for knowledgeable, practical support. Contact TREEL by clicking here.
