Examining Executor Fees by State and the Role of The Executor

Creating a will is often the first step to a comprehensive estate plan, but it is far from the last. No matter what you plan to leave behind, someone must facilitate the process of managing your bequeathments and distributing them among your beneficiaries. That is where an executor comes into play. Continue reading for an in-depth analysis of executor fees by state.

What is an Executor of a Will?

An executor or executrix is charged with the logistic tasks associated with the dissolution of an estate. In the case of a probate process with a will, the executor will refer to the will. Many wills also name their preferred executors, although only the probate court can bestow the rights needed to manage and distribute an estate.

Without a will, the executor’s task will be guided by state law. While managing a decedent’s assets is part of the job description, an executor’s responsibilities usually extend far beyond the estate assets.

What Does the Executor Do?

The role of the executor often begins with the death of the decedent. Usually, the executor files for probate, which entails taking a person’s death certificate to their county courthouse and requesting a petition to begin the probate process.

If the total value of the decedent’s estate is below a specific value, the executor may opt for a special affidavit before beginning probate to speed things along. In California, for example, estates under a specific total value (not counting exemptions) qualify for a small estate affidavit, but only if probate has not been initiated.

Once an executor petitions the probate court, their next task lies with the respective beneficiaries of the estate – usually the next of kin and, in some cases, close friends of the decedent. Each must be informed of the dates when probate will begin.

Executors must also inform creditors and other interested parties insofar as they are known. If the decedent had certain debts, then those creditors must be informed of the decedent’s passing. Furthermore, an executor may publicly declare the decedent’s death via a newspaper.

Once the relevant parties are informed and the probate date has been given, an executor must wait for the court to grant them the title and power necessary to manage the decedent’s estate officially. At this point, the executor is responsible for looking after the estate’s contents until properly closed.

Steps for Managing the Decedent’s Estate

Debts come first. If none come forward within the time allotted by the court, the estate may be distributed among its beneficiaries, either as per the will or intestate law. An executor’s duty is to the estate and the best interests of the beneficiaries, but creditors have a right to assert a claim against the estate.

Once assets are distributed and adequately titled, the executor must close the estate, finish their job, and relinquish their title. At this point, the probate process has ended.

The administration of an estate is basically a full-time job that may require special knowledge or skills, whether financial, legal, or both. Smaller estates may resolve probate in a matter of months. Larger estates can take well over a year, if not longer. Some estate plans are deliberately built to draw out over the years, although typically not in probate court.

This makes the role of executor an extremely difficult and specialized one, in addition to being a role of honor and one often bestowed to a grieving loved one in one of their personal darkest hours.

It’s no wonder, then, that executors are entitled to compensation – fairly specific compensation. They may need to take days off work to show up at court and dedicate themselves substantially to distributing the estate.

In cases where no loved one or friend might fit in the role of executor, a family or decedent may seek a professional legal executor – usually an individual, often an attorney. Here, again, compensation is due. This is what brings us to the executor’s fee.

What Are Executor Fees by State?

No laws limit an executor’s fee, at least not directly. In some states, executors are entitled to a percentage of the estate’s total value, with a flat cap. For other states, executors are entitled to whatever the decedent leaves behind for them, provided that a judge evaluates the fee as fair and reasonable.

In some states, executors are paid only after their job is done. In other states, executors may be paid at any point during their administration.

Generally, an executor is compensated in one of three different ways:

  • At the court’s discretion, as per the decedent’s suggestions.
  • A percentage of all administrative transactions (i.e., a cut of every cost and sale during estate management).
  • A percentage of the gross estate (often at a regressive rate, i.e., 5 percent of the first million, 2.5 percent of the next $2 million, and so on).

Overview of Executor Fees by State

Different states play by different rules. The following states pay executors via “reasonable compensation” at the court’s discretion:

  • Alabama
  • Alaska
  • Arizona
  • Colorado
  • Connecticut
  • Delaware
  • Florida
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Kansas
  • Maine
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Nebraska
  • New Hampshire
  • New Mexico
  • North Dakota
  • Pennsylvania
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Utah
  • Vermont
  • Virginia
  • Washington

Here are the states allowing reasonable executor compensation with set limits or guidelines:

  • Arkansas
  • Iowa
  • Kentucky
  • Maryland
  • North Carolina

Here are the states with flat or varying percentage charges:

  • California
  • Georgia
  • Louisiana
  • Missouri
  • Montana
  • Nevada
  • New Jersey
  • New York
  • Ohio
  • Oklahoma
  • Oregon
  • Texas
  • West Virginia
  • Wisconsin
  • Wyoming

Are Executor Fees By State Taxable?

Yes. Executor’s fees by state count as income and are taxed as income. For executors who aren’t hired guns but close friends or loved ones, it may be an option to forego the paid fee and settle for an inheritance instead. This is usually allowed and does not count as income. Depending on the state, however, the executor may have to pay inheritance taxes (these are not federal).

Being an executor is a great honor but a great responsibility as well. If you have been named an executor for a loved one, consider seeking legal help to fulfill your role as best as possible.

Executor Fees by State and the Role of The Executor - Werner

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