A personal representative is the person who is appointed by the probate court to care of the estate of a decedent during the administration process. A personal representative is also referred to as an executor. For their work, a person representative is paid a fee or a commission. Unless the decedent’s will provided for personal representative compensation, compensation is determined by statute. The total fee is based on two sources: corpus commissions and income commissions. N.J. Rev. Stat. § 3B:18-14
Corpus Commissions
“Corpus” refers to all the assets received by the personal representative upon the death of the decedent. According to N.J. Rev. Stat. § 3B:18-14 the personal representative is entitled receive compensation equal to a percentage of the value of the estate’s probate assets as follows:
- 5% of the first $200,000 of probate assets
- 3.5% of the next $800,000 of probate assets
- 2% of all probate assets having a value in excess of $1 million
Example 1: If the estate corpus (value of probate assets) was $1,000,000, the personal representative would be entitled to a fee of $38,000.
5% of $200,000 = $10,000 + 3.5% of $800,000 = $28,000 = $38,000
Example 2: If the estate corpus (value of probate assets) was $5,000,000, the personal representative would be entitled to a fee of $118,000.
5% of $200,000 = $10,000 + 3.5% of $800,000 = $28,000 + 2% of $4,000,000 = $80,000 = $116,000
Probate assets include property that are held in the name of the decedent only and that do not have beneficiary designations or rights of survivorship. Those assets can be left to others through a will, or, the absence of a will, through the New Jersey laws of intestate succession. Examples of probate assets include:
- Real estate owned solely by the decent or with others as tenants in common
- Bank and brokerage accounts that are not jointly owned and that do not have payable/transfer or death designations
- Personal property such as cars, jewelry, or household furnishings
- On the other hand, types of property that are not probate assets includes:
- Trust property. Property that was transferred to a trust during the life of the decedent/trustor, would no longer be part of the decedent’s probate estate. The property would go to the trust’s beneficiaries according to the terms of the trust.
- IRAs, 401(k)s, 403(b)s, and other retirement accounts or retirement benefits with beneficiary designations. Upon the decedent’s death, the property would go to the designated beneficiaries.
- Bank and brokerage accounts with a transfer-on-death or pay-on-death designations. Upon the decedent’s death, the property would go to the person designed as the transfer or pay on death designee.
- Property held as joint tenancy with rights of survivorship. As for property that is co-owned with others with survivorship rights, upon the death of a joint owner, their interest in the property would go to the other joint owners by operation of law.
- Life insurance policies. Proceeds of life insurance policies would go to the designated beneficiary.
Income Commissions
Income commission is the fee earned by the personal representative based on income generated by the estate. In other words, the personal representative is rewarded for increasing the value of the estate. N.J. Rev. Stat. § 3B:18-13
The personal representative receives commissions in the amount of 6% on all income received. Income might be rents received, earnings from stocks and bonds, or royalties from intellectual property. For example, if an estate earned $2000 from investments, the personal representative would be entitled to an income commission of $120. The income commission would be in addition to their corpus commission.
Reduction or Increase in Commission
The statutory commissions can be reduced or increased based on the actual performance of the personal representative. For example, if a beneficiary believes that the personal representative failed to perform their duties adequately, they can petition the court and request a reduction in the personal representative’s corpus commission. The petitioner must show that the services rendered by the personal representative were “materially deficient” or that the services performed were substantially less than generally required. N.J. Rev. Stat. § 3B:18-14
On the other hand, if the personal representative activities were substantially more than generally required, they can petition the court to ask for a greater corpus commission. N.J. Rev. Stat. § 3B:18-16