When and how much does the executor receive compensation?
This can depend on the will or state law.
The amount the executor receives and when it is paid can depend on several factors.
Did the deceased leave a valid will?
The will of the deceased should be reviewed carefully to determine the amount to be paid to the executor. Some may choose to specify amounts as a fixed sum when writing their will. Others may allow reasonable fees based on state law. Some may leave a specific bequest to the executor instead of authorizing them to collect fees. This offers a tax benefit to the executor, as the bequest is not subject to taxation while fees are taxed as ordinary income.
What does state law say?
If the deceased died without a will, or if the will does not mention any payment, intestate law takes over and governs the fees the personal representative is entitled to receive.
Some states provide specific rules for fees. Typically, they are calculated by multiplying the total value of the probated estate by a specified percentage. This percentage usually increases as the total value increases. For example, fees might be equal to 4 percent of the first $100,000 and then gradually decrease to 1 percent for values over $9 million.
In some cases, fees may be a percentage of the transactions undertaken by the probate—transactions that the executor handled—rather than the total value of the estate. Transactions typically include any income earned by the probate and all expenses paid, although they usually do not include distributions to beneficiaries.
In some other states, all fees are left to the discretion of the probate court. The judge will decide what is “reasonable.” Probate courts typically issue local guidelines regarding reasonable fees in these situations.
Is the personal representative entitled to “extraordinary” fees?
Even in states where the fees for personal representatives are set by state law, they may be entitled to receive additional fees for “extraordinary” services provided beyond the scope of duty. Extraordinary services can include overseeing the sale of real and personal property of the deceased, conducting investigations on behalf of the probate, defending against probate investigations, engaging in disputes and tax proceedings, or operating the probate business for a period of time.
Are there multiple personal representatives?
If there are multiple personal representatives and the will does not provide any instructions on how to allocate fees among them, state law will determine how fees are paid to each. In some states, the law requires that multiple executors divide the fees equally. In other states, each executor may collect the full fees that a single personal representative is entitled to receive.
Can the personal representative be an institution?
Sometimes the personal representative is an institution like a bank or trust company. In this case, check whether the will specifies that the institution is entitled to receive compensation according to the fee schedule published at the time of the deceased’s death. These fee schedules resemble state laws that calculate fees as a percentage of the total value of the probated estate. The state laws will also determine the fees for the institution in this case if the will is silent on the matter.
Can the personal representative also be the probate attorney?
The will should also address payment for the attorney who also acts as a personal representative, but it is possible that the deceased and the attorney had entered into a separate written agreement at the time of drafting the will. Otherwise, state law should determine whether the attorney can collect fees as a personal representative and as a probate attorney.
When
A professional works as a personal representative, and he can earn the same hourly rate that he charges his other clients for similar work.
Did the beneficiaries agree to the personal representative’s fees?
Sometimes the beneficiaries of the estate and the personal representative reach a mutual agreement about the amount and when the personal representative will be paid, regardless of what the will says or what state law provides. This can happen early in the estate process or at its conclusion, when the estate is ready to close. However, in many states, this requires court approval.
How much did the personal representative pay out of pocket?
The personal representative is entitled to be reimbursed for any administrative expenses of the estate that he may pay out of his own pocket. These expenses can include costs that must be paid before the estate is opened, such as medical and funeral bills. Travel and mileage expenses incurred while administering the estate, as well as office supplies and postage, should also be reimbursed.
Ongoing expenses such as utility bills, property taxes, insurance, and storage fees are usually paid from estate funds, but representatives may sometimes find themselves in situations where they must pay these expenses out of their own pocket as well. In all cases, he is entitled to compensation in addition to payment for his services.
Expenses paid out of the representative’s pocket are typically reimbursed during the estate administration period.
When will the personal representative receive payment?
In some states, fees paid to the personal representative — whether ordinary or extraordinary — can be paid at any time during the administration without a court order. But even in these cases, beneficiaries can request a reduction of fees that have already been paid if a probate judge determines that the fees were unreasonable for the services provided.
In other states, representative fees can only be paid after a court hearing and with the judge’s approval. However, the hearing requirements can be waived if all beneficiaries are informed of the fees and sign consents to allow payment without a court order.
Acceptance of compensation is not required
Even if the will stipulates compensation and specifies a certain amount, the representative is not obligated to accept payment. Sometimes, close family members are reluctant to do so, as they are essentially taking money from other beneficiaries, who will only receive what is left after paying the representative and other expenses. If you find yourself in that situation, you should not feel obligated to take the money.
Frequently Asked Questions (FAQs)
Will the representative’s fees change if they are family members?
The amount of compensation for the representative does not depend on their relationship to the deceased. The scope of work is the same, regardless of whether the representative is a family member, friend, or professional.
Source: https://www.thebalancemoney.com/how-much-does-a-personal-representative-get-paid-3505266
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