How to calculate compensation for an estate executor

Written by joseph nicholson
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The estate executor is the person named by a Last Will and Testament to manage the administration of a deceased's estate. Usually this individual is compensated for time and effort. A spouse or family member, however, can volunteer to serve free of charge. If the executor is the sole beneficiary, there is no reason to designate part of the inheritance as executor compensation. Usually, there is no law establishing a certain method to calculate executor compensation. State law, tradition and the will itself, however, provide guidance.

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    Look for direction in the will (if applicable). The first place to look for guidelines for calculating executive compensation for an estate executor is in the will itself, if one exists. In some cases, the document will direct a method for compensating the executor, or specify which state's laws should apply. In some cases, the will might only authorise "reasonable" compensation.

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    Check state laws. Another source of guidance for calculating executor compensation is likely to come from state laws. Each state has its own probate laws. In some states, the probate code might provide a flat rate to apply, but others simply list the types of tasks for which an executor can be compensated. In some states, explicit authorisation for compensation is limited to probate attorneys.

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    Assess based on value of income to and disbursements from the estate. Apply a flat rate to the value of assets collected into the estate by the executor. Use the same method for the value of disbursements. Traditionally, an executor is entitled to receive between 2 and 3 per cent of the total value of assets as they enter and leave the estate.

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    Account for special considerations. Estates that are very large or entail an usually burdensome level of effort for the executor can sometimes warrant additional compensation. Courts can also award additional compensation for success and skill demonstrated by the executor.

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    Consider personal representative liability. Executor compensation can be limited by any errors or loss of value resulting from estate administration. If the probate court finds the executor liable for losses to the estate, these losses can be deducted from compensation.

Tips and warnings

  • "Personal representative" is the term for a person not named in the will, but who is designated by the court to manage the estate. Sometimes this term is used interchangeably with "executor." A personal representative is entitled to the same compensation as an executor.

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