Executor Commission in PA: When, Why, and How Much?

Estates and Trusts

May 20

Serving as Executor of an estate is an important role, requiring time, effort, and some degree of risk on the part of the Executor. Because of this, Pennsylvania statutory law allows the Executor (or Administrator, in the case of an estate for someone who died without a Will) to take a commission for his or her work in administering the estate. A few questions that Executors often have is how much is the commission, should they take it, and if they do, when should they take it?

What is the Executor Commission, and how is it calculated?

Under Pennsylvania statutory law, Executors are entitled to compensation, called a commission, for their service to the estate in an amount “reasonable and just under the circumstances.” An Executor is entitled to, but not required to take, this commission.

The Pennsylvania legislature has not clarified what amount exactly is “reasonable and just” when the Executor is determining the commission they plan to take. However, Executors wondering the answer to this question are not left without guidance. In the 1983 case In re: Johnson’s Estate, a series of tables was released that can be used as a first step to calculate commissions and fees for simple estates based on the size and type of assets.

An Executor taking their commission based on this case’s guidelines, although not entirely determinative, can support the position that a commission less than or equal to this amount satisfies the statutory requirements. For more information on calculating a commission using these guidelines, see my “Johnson Guidelines” blog post here.

While an Executor may choose not to take the commission at all or to take a lesser amount, the commission is an entitlement and is typically well-earned for the work done.

Why wouldn’t an Executor take a commission?

If being an Executor can be a lot of work, some may ask why an Executor would not take full commission or waive the commission entirely? Serving as an Executor is a commitment, and, because of this, many Executors decide to take all or part of the allowable commission. However, there are some circumstances where this might not be the right choice, including the examples below.

One major reason to consider waiving the commission is the personal income tax implications to the Executor. Inherited assets are not taxable for income tax purposes to the recipient, while the commission is taxable as income to the Executor. If the Executor is the only beneficiary, it may make sense to waive the commission and inherit the amount instead, preventing unnecessary personal income tax liability, although there would be some additional inheritance tax due, since an untaken commission cannot be a deduction.

Another reason an Executor may choose not to take the full commission could be that he or she wants to make sure estate funds end up with the ultimate beneficiary. For example, if a minor child is the sole beneficiary, the Executor may choose to waive the commission to preserve funds for the child’s benefit, especially if there are limited estate funds and supporting the child is the primary concern.

When should an Executor take the commission?

The commission is taxable as income to the Executor in the year in which the amount is paid. Because of this, an Executor might consider taking the commission in lump sum or as multiple payments split over more than one tax year. That said, in general, Executors should not take the full commission until later in the estate administration process, after much of the work has been completed. In general, it is recommended that the full commission not be taken until the inheritance tax return and the first year’s estate income tax return have been filed and the creditor period after estate advertising has passed.

Ultimately, deciding when to take the commission and how much to take is a highly individualized analysis, and an Executor should consider whether taking the full commission (or a lesser amount) is right for them and, particularly for estates with limited funds, the potential impact on the estate’s beneficiaries.