A personal representative—sometimes called an administrator, an executor, or an executrix when a woman serves in this capacity—is typically entitled to be paid for her services. The personal representative is the individual who is charged with guiding an estate through the probate process, and it can sometimes be a complicated and time-consuming job.
How much they receive and when they'll be paid can depend on several factors.
Did the Decedent Leave a Valid Will?
The decedent's last will and testament should be carefully reviewed for guidance as to how much the personal representative should be paid. Some people choose to limit the fees to a specific dollar amount when they write their wills. Others opt for allowing the payment of reasonable fees based upon state law.
Still others might leave their personal representative a specific bequest instead of authorizing them to collect a fee. This actually provides an income tax benefit for the personal representative, because a bequest is nontaxable while fees are taxed as ordinary income.
What Does State Law Say?
If the decedent died without leaving a will, or if the will doesn't mention anything about payment, state law takes over and governs the fee that the personal representative is entitled to receive.
Some states provide specific rules for fees. They're typically calculated by multiplying the gross value of the probate estate by a specific percent. As the gross value increases, the percent decreases. For example, the fee might be equal to 4 percent of the first $100,000 then decrease incrementally until it's just 1 percent of values over $9 million.
The fee is sometimes a percentage of transactions made by the estate—transactions that the executor handled—rather than overall estate value. Transactions would typically include any income earned by the estate and all expenses paid, although it would not normally include distributions to beneficiaries.
In still other states, the entire fee is left to the discretion of the probate court. A judge will decide what is a "reasonable." Probate courts often issue local guidelines for reasonable fees in these cases, however.
Is the Personal Representative Entitled to an "Extraordinary" Fee?
Even in states where the personal representative's fee is set by state law, he might be entitled to receive an additional fee for "extraordinary" services that are rendered above and beyond the call of duty.
Extraordinary services can include overseeing the sale of the decedent's real estate and personal property, conducting litigation on behalf of the estate, defending litigation against the estate, being involved in tax disputes and proceedings, or running the decedent's business for a period of time.
Is There More Than One Personal Representative?
If there is more than one personal representative and the will is silent as to how each is to be paid—it doesn't include any provisions for this—state law will dictate the fees paid to each of them. In some states, the law requires that multiple executors divide the fee equally. In others, each executor can collect the full fee that one personal representative would be entitled to receive.
Is the Personal Representative an Institution?
Sometimes the named executor is an institution such as a bank or a trust company. In this case, look to see if the will specifies that the institution is entitled to receive compensation in accordance with its published fee schedule as of the date of the decedent's death.
These fee schedules are similar to state laws that calculate the fee as a percentage of the value of the gross estate. State law will dictate the institution's fee in this case as well if the will is silent on the issue.
Is the Personal Representative Also the Attorney for the Estate?
The will should also address payment to an attorney who is also acting as the personal representative, but it's possible that the decedent and the attorney entered into a separate written agreement at the time the will was drafted. Otherwise, state law should dictate whether the attorney can collect fees as both the personal representative and as the attorney for the estate.
When a professional acts as personal representative, it's acceptable for her to bill the same hourly rate she charges her other clients for similar work.
Have the Beneficiaries Agreed on the Personal Representative's Fee?
Sometimes the estate beneficiaries and the personal representative will reach a mutual agreement as to how much and when the personal representative will be paid, regardless of what the will says or what state law provides. This can occur early on in the probate process or toward the end, when the estate is getting ready to close. In many states, however, this requires court approval.
How Muchm, if Anything, Has the Personal Representative Paid out of Pocket?
The executor is entitled to be reimbursed for any estate administrative expenses she might pay out of her own pocket. These might include expenses that had to be paid before the estate could be opened for probate, such as doctor and funeral bills. Travel expenses and mileage incurred while administering the estate as well as office supplies and postage should also be reimbursed.
Ongoing expenses such as utilities, property taxes, insurance, and storage fees are normally paid from estate funds, but executors might sometimes find themselves in positions where they must pay these out of pocket as well. In all cases, he's entitled to reimbursement in addition to payment for his services.
Out-of-pocket expenses are typically reimbursed during the course of estate administration.
When Will the Personal Representative Receive Payment?
In some states, fees paid to the personal representative—both ordinary and extraordinary—can be paid at any time during the administration without a court order. But even in these states, the beneficiaries can request a decrease in the fees already paid if the probate judge determines that the fees were not reasonable for the services rendered.
In other states, the executor's fee can only be paid after a court hearing and with a judge's approval. The requirement for a hearing might be waived, however, if all the beneficiaries are informed of the fees to be paid and they sign consents to authorize payment without a judge's order.
Accepting Compensation Isn't Required
Even if the will provides for compensation and sets a certain amount, an executor need not accept payment. Sometimes, close family members are reluctant to do so, because they're effectively taking the funds from other beneficiaries, who will only get what's left after the executor and other expenses are paid. If you find yourself in that situation, you don't have to feel compelled to take the money.
Frequently Asked Questions (FAQs)
Will an executor's fees change if they are a family member?
How much an executor is paid isn't dependent on their relationship to the deceased. The amount of work is the same, regardless of whether your executor is a family member, friend, or professional. Most state laws designate fees for the executor based on the size of the estate.
Can an executor change a will?
An executor can't change a will without the permission of its beneficiaries, because the executor is required to act in the best interest of the estate and its beneficiaries. Changing the will on their own would allow the executor to act against those interests.
How old does an executor of a will have to be?
Anyone over age 18 can be named as an executor of a will. It can be helpful, though, to choose someone older who has experience with the assets they will have to manage through the estate. For example, an 18-year-old who has never bought or sold a house might have trouble handling an estate that contains multiple properties.