If you have been named as an executor in your loved one’s will, you might wonder if you are entitled to be paid for your work. Serving as an executor means that you will be required to fulfill many different duties that can be time-consuming. At Elder Care Direction, we can help you to understand your role as an executor and whether or not you should be compensated.
Are executors entitled to be paid?
A majority of executors are paid for their work. Some wills provide how they will be paid. Some states also have laws regarding payments to executors. If compensation is not mentioned in a will, most states give the right of reasonable compensation to executors. Your state may have a formula that you can use to calculate your fee.
Should you accept a fee?
You might be hesitant to accept a fee when you are helping your family members during a time that is tough for everyone. You are able to choose to waive your right to payment if you choose to do so. It is important for you to consider that serving as an executor will require you to work for the estate for months or years. It’s a huge responsibility when you are tasked with handling other people’s money, and you may be required to do a lot of work.
It won’t make much sense for you to collect a fee if you are inheriting a large portion of the estate. Executor’s fees are taxable income. If you will be inheriting most of everything, you would be better off to waive the fee and inherit the money instead since money that you inherit is not taxable income.
If the estate is large enough that it will incur federal estate tax, you might be better off taking the fee if your personal tax rate is lower. If the estate is that large, you should consult with a probate lawyer and ask him or her about whether you should take the executor’s fee.
Calculating the fee
If you do decide that you want to accept a fee, you will have to determine what amount is reasonable. The court will eventually weigh in, but it is not likely that it will argue with your fee unless a beneficiary objects to it.
There are several methods that you can use to figure out a reasonable fee. If your state has rules for the amount that you can claim, you can simply follow the provided statutory formula. If your state does not have such a rule, you can take a percentage of the estate. Some states have specific percentages that can be charged based on a portion of the estate’s value.
Some executors charge a fee based on a percentage of the transactions. For example, Texas allows executors to charge a commission of 5% on the amounts the estate takes in and on the amounts it pays out. However, there are many exceptions that are contained in the statute that can complicate the calculation.
Some executors charge an hourly rate for the time that they spend on handling the estate. If you charge an hourly rate, you must keep track of all of your time, and your rate should be reasonable for the work that you perform.
Another method that is sometimes used is to take a percentage of the estate’s value. For example, if you sold a property while serving as an executor, you may be able to take a percentage of the sales amount.
Contact Elder Care Direction
Serving as an executor is a big responsibility. Whether or not you choose to charge a fee is an important decision. The professionals at Elder Care Direction can help you to understand the types of fees that might be charged. We can also refer you to one of our partner probate attorneys for help with managing the estate. Contact us today by filling out our online form to schedule a consultation.
