How Do You Compensate the Executor of a New York Estate?
When making your will, one issue you need to consider is how to compensate the executor of your estate. If you have a particularly complex estate–i.e., one with a lot of assets that will take time to liquidate–it may take your executor many months (or years) to complete the New York probate process. Indeed, by law an executor is entitled to a certain statutory commission unless the deceased specifies a different method of compensation in their will.
To give you some idea of how the statutory commission works, let’s say John Smith dies leaving an estate worth $200,000. New York’s statutory commission rule states the executor may receive no more than 5 percent of the first $100,000 ($5,000) and 4 percent of the next $100,000 ($4,000), for a maximum commission of $9,000.
Surrogate’s Court Awards $106.5 Million Commission to Executors of Leona Helmsley Estate
Of course, these numbers start to increase exponentially when talking about multi-million or multi-billion dollar estates. Consider this recent decision from a Manhattan Surrogate’s Court judge regarding the estate of Leona Helmsley. The famous New York City businesswoman passed away in 2007, leaving an estate worth approximately $5 billion.
The Surrogate’s Court was tasked with deciding the compensation of the five individuals appointed as co-executors of the estate under Helmsley’s will. The will expressly stated New York’s statutory commission rule did not apply. Rather, Helmsley said the executors should receive “reasonable compensation” for services rendered. But the will did not elaborate on what constituted “reasonable” compensation.
As the Surrogate’s Court judge explained, there are a number of factors that courts apply when determining reasonable compensation, such as the time spent on the estate, the value of the assets, and the “difficulty of the issues and the skills required to handle them.”
The New York State Attorney General also played a role in this case. The bulk of Helmsley’s estate was left to a charitable trust. Under New York law, the Attorney General represents the interests of the trust’s ultimate charitable beneficiaries. Here, the Attorney General objected to the multi-factor approach to fixing the executors’ compensation, arguing instead for “a simple arithmetic formula which considers only the reasonable amount of time spent multiplied by an appropriate hourly rate.”
The judge said there was no legal basis for the Attorney General’s methodology, and in any case there was no reason to believe her approach would “yield a better result.”
Applying the multi-factor approach, the judge ultimately fixed the five executors’ total compensation at $106,250,000. While that may sound excessive, the judge noted it “amounts to less than 2 percent of the estate” and “reflects the unique and complex nature of this massive estate and the attendant services the executors were called upon to perform at great personal financial risk.”
Speak with a New York Estate Planning Attorney Today
Executor compensation is just one of many subjects you should discuss with a Westchester County estate planning lawyer as part of making your own will. Contact Meyer & Spencer, PC, today to schedule an appointment so we can sit down and learn more about your estate planning needs.