The Risks of Being an Executor: Commissions and Personal Liability in NSW

Are you an executor of a Will? Before administering the estate, you should understand that this role carries significant risks. Specifically, these include personal liability for the estate’s expenses.

Furthermore, you should know that you may be entitled to commission for your work in administering the deceased’s estate. It is important to understand how the law determines this commission. Consequently, this ensures you receive a correct and fair amount for your service.

Table of Contents

• Can an executor of a Will receive commission?
• How is commission determined?
• Personal liability
• Finalising tax affairs
• Seeking legal advice

Can an executor of a Will receive commission?

An executor of a Will may charge a reasonable commission for managing the deceased’s estate. However, executors do not automatically receive a commission. Instead, they must apply to the Supreme Court under the relevant jurisdictional provisions.

Alternatively, if all residual beneficiaries are adults, they can unanimously agree on the commission amount. Specifically, you should ensure this agreement is in writing and signed by all beneficiaries.

How is commission determined?

Generally, the Supreme Court considers several key factors when determining commission:

• The size of the deceased’s estate
• The type of care and responsibilities required of the executor
• The total time the executor invested in performing their duties
• The care and diligence shown by the executor throughout the process

Commission typically ranges from 1% to 3% of assets after deducting liabilities. For example, an estate worth $1.5 million may have $1 million remaining after paying the mortgage, funeral, and other expenses. In this case, the executor may receive $10,000 to $30,000 in commission.

Furthermore, if an executor is also a beneficiary, they may still claim commission. In such instances, the Court will consider the amount already left to them as a beneficiary and adjust the commission accordingly.

To ensure you receive a fair commission, we recommend consulting one of our experienced lawyers.

Personal liability

Executors must comply with the Will and relevant Succession Legislation when managing the estate. Specifically, failure to act diligently can lead to legal consequences.

Finalising the deceased’s tax affairs is a task that executors often underestimate. Those who fail to carry out these duties properly risk personal liability for tax debts. Therefore, we strongly advise obtaining legal and accounting advice early in the process.

What is usually involved in finalising a deceased’s individual tax affairs?

The executor must notify the Australian Taxation Office (ATO) of the death and arrange for any outstanding tax returns to be lodged. Additionally, they must prepare and lodge a final tax return and pay any outstanding tax liabilities.

Moreover, executors may face more complex obligations if the deceased had involvement with businesses, trusts, or self-managed superannuation funds.

Executors should remember that estate tax differs from individual tax. Since the law treats estates as trusts, executors must specifically:

• Obtain a tax file number for the estate
• Ensure tax returns are prepared and lodged with the ATO
• Pay any applicable tax liabilities

This process can take considerable time. This is especially true if the deceased left multiple outstanding returns, did not use an accountant, or left limited financial records.

Executor Tax Responsibilities Comparison

Requirement	Individual Tax Affairs	Estate Tax Affairs
Objective	Finalise the deceased person’s personal income tax	Manage tax on the estate’s ongoing income
Action	Lodge the final “Date of Death” return	Obtain a separate Tax File Number (TFN) for the estate

Protecting Your Interests as an Executor

Administering an estate is a significant responsibility. Consequently, executors should seek legal and accounting advice to avoid the risk of personal liability for outstanding tax debts. An experienced lawyer can help you manage the estate efficiently. Furthermore, we ensure all legal requirements are met while advising you on the commission you are entitled to for your efforts.

Somerville Laundry Lomax has served the Northern Rivers for over 130 years. Our Lismore solicitors, Ballina solicitors, Byron Bay solicitors, and Kyogle solicitors provide the expert guidance you need to meet your obligations safely and with confidence.

Disclaimer: This is general information only. You should obtain professional advice relevant to your circumstances.