Lets face it: serving as an executor is a difficult task. In the midst of grief and messy relationships, executors are tasked with filling out paperwork, interacting with the legal system, distributing valuable assets, and carrying out the last wishes of the deceased. If the estate is particularly complicated, executing the estate may become a second job for some people (like my friend who administered two estates at once).
With this in mind, an important question arises. Do you want to compensate your executor? Should you (as the executor) request or accept compensation for your service? While we can’t make this decision for you, here are some things to think about and different ways of compensating an executor.
On occasion, a will spells out how an executor will be compensated. In that case, the will usually governs the compensation. Otherwise, the laws of the state usually govern executor compensation. Each state has different laws about how executors are compensated.
Most states allow executors to receive “reasonable” compensation for their services. Reasonable is subjective, so some states place a percentage cap on the fee. Other states use a formula for determining compensation – usually a percentage of the probate assets’ value.
Different people have different feelings about accepting compensation for serving as an executor. Some may not feel ‘right’ taking assets from the estate of the deceased, particularly if the value is small. Others may want to receive compensation for the lost wages (especially if you are paid by the hour) incurred because of their duties. Both viewpoints are legitimate, and this is a personal preference.
There are also other factors to consider. Simple estates which are well planned are less of a burden on the executor than poorly planned, contentious, or high-value estates. Some heirs may balk at compensating the executor, while other heirs may understand your plight. You will be required to pay tax on the compensation you receive for serving as executor.
The choice to provide for or accept executor compensation is a personal one. If you choose to accept compensation, one way to make the process smoother is to keep detailed track of your hours and assign yourself a reasonable rate (if you elect for this instead of a percentage of the estate).
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