One of the most common questions beneficiaries and executors have when someone passes away is, "What percentage of an estate does the executor get?"

We’ll discuss typical executor fees and how to submit a request for compensation. We’ll also explain certain circumstances where executors work for no fees. Plus, we’ll explore how Trustworthy can help executors manage their duties and securely store important documents.

Key Takeaways

• Executor fees vary depending on state law, the size and complexity of the estate, and the executor's professional experience.

• In many states, executors are entitled to a percentage of the estate's value, typically ranging from 2% to 5%.

• Some states allow executors to charge an hourly rate for their services, while others permit a flat fee.

Average Executor Fees

The average executor fee percentage varies widely. These fees are regulated by state law, and some states provide a fee schedule based on a percentage of the estate’s value. Others allow the will to specify a fee or leave it up to the court to decide a reasonable fee if the will does not mention it or there is no will. 

As Benjamin Inman, an attorney at Inman Law, explains: "An executor is usually entitled to reasonable compensation, which is an admittedly imprecise term. But it is necessarily so, given the diversity of estates and the special circumstances that may apply to them. 

"Many jurisdictions have a fee schedule that provides a guiding point for determining what reasonable compensation means in the vast majority of estates. There may be deviations from the fiduciary compensation schedule, but those deviations usually need to be based on something specific to the particular estate being administered."

• For estates valued at less than $100,000, the average executor fee is about 5%.

• For estates valued between $100,000 and $500,000, the average fee is around 3%.

• For estates valued between $500,000 and $5 million, the average fee is approximately 2%.

• For estates valued over $5 million, the average fee is typically less than 1%.

These averages are not legally binding and may not reflect the specific laws and guidelines in your state. Executors and beneficiaries should consult with an experienced estate attorney to determine a fair and reasonable fee for their particular situation.

Requesting and Approving Executor Fees

In most cases, executors must follow a specific process to request and receive compensation for their services. This typically involves several key steps.

Keeping Detailed Records of Time and Expenses

One of the most important aspects of requesting executor fees is maintaining accurate and detailed records of the time spent and expenses incurred while settling the estate. This documentation serves as the foundation for the executor's compensation request and helps demonstrate the reasonableness of the fees to both the court and the beneficiaries.

Executors should keep a log of all estate-related activities, including tasks such as:

• Identifying and inventorying assets

• Contacting creditors and paying debts

• Communicating with beneficiaries

• Managing and maintaining estate property

• Preparing and filing tax returns

• Distributing assets to beneficiaries

For each task, the executor should record the date, a brief description of the activity, and the time spent. If they incur any out-of-pocket expenses related to the estate, such as postage, copying costs, or travel expenses, they should document them and support them with receipts.

• Related: Can an Executor Access Bank Accounts?

It's important to be as accurate and specific as possible in record-keeping. This helps support the reasonableness of their fee request and provides transparency to beneficiaries. Plus, it helps avoid potential disputes or challenges down the line.

Submitting a Formal Request for Compensation

This request, often called a "petition for executor fees," is a legal document outlining the executor's services and the compensation they’re seeking.

The petition should include several key components:

• A summary of the executor's responsibilities and the time spent on each task

• A detailed breakdown of the time spent and the hourly rate or percentage fee being requested

• An itemized list of any out-of-pocket expenses incurred

• Supporting documentation, such as time records and receipts

• A statement of the total compensation being requested

In some cases, the executor may also need to provide additional information, such as a copy of the will or a detailed accounting of the estate's assets and liabilities. The specific requirements for the petition may vary depending on the jurisdiction and the local court rules.

Notifying Beneficiaries of the Request

Once the executor has submitted their petition for compensation, they must notify the estate's beneficiaries of the request and give them an opportunity to review the petition and raise any objections. This notification process helps ensure transparency and allows beneficiaries to have a say in the executor's compensation.

The specific notification requirements may vary depending on the jurisdiction and the terms of the will. Generally, the executor must send a copy of the petition and a notice of the court hearing to all beneficiaries.

The notice should include:

• The date, time, and location of the court hearing

• A statement that the beneficiaries have the right to object to the executor's compensation request

• Instructions on how to file an objection with the court

Beneficiaries typically have a certain amount of time, often 30 days, to review the petition and file any objections. If they object, they must submit a written objection to the court outlining their specific concerns or challenges to the executor's request.

Executors should be prepared to respond to beneficiaries' objections and may need to provide additional documentation or testimony to support their fee request. In some cases, the court may schedule a hearing to allow both the executor and the objecting beneficiaries to present their arguments.

• Related: What Happens If the Executor Dies

Obtaining Court Approval for the Requested Fees

After the beneficiaries have had an opportunity to review the petition and raise any objections, the court will review the request and make a determination on the reasonableness of the fees.

The court will consider several factors when evaluating the executor's request, including:

• The size and complexity of the estate

• The time and effort required to settle the estate

• The executor's experience and qualifications

• The quality of the executor's services

• The customary fees for similar services in the area

• Any objections raised by beneficiaries

If the court finds the executor's request is reasonable and justified, it will approve the fees and authorize payment from the estate's assets. It may also approve reimbursement for any out-of-pocket expenses incurred by the executor.

However, if it determines the fees are excessive or unreasonable, it may reduce the amount of compensation or deny the request altogether. In some cases, the court may also require the executor to provide additional documentation or testimony to support their request.

Once the executor's fees are approved, the executor can withdraw the funds from the estate's assets and distribute the remaining assets to the beneficiaries according to the terms of the will or state law.

It's important for executors to understand that the court has the final say on their compensation and that the approval process can take some time. Executors should be patient and diligent in their record-keeping and communication with beneficiaries to help ensure a smooth and successful fee approval process.

Settling an estate can be a difficult and time-consuming process, but Trustworthy can help executors manage their duties more efficiently and securely. By using Trustworthy, executors can streamline the estate settlement process and reduce the risk of disputes. Plus, with the sharing feature, they can ensure all parties involved have access to the information they need.

When Should an Executor Work for No Fee?

Certain situations may cause an executor to waive their right to compensation for their services. One example is when the executor is also a beneficiary of the estate. In this case, accepting a fee for services could actually result in a lower overall inheritance due to the different tax treatments of executor fees and beneficiary distributions.

Executor fees are considered taxable income and are subject to ordinary income tax rates. This means the executor must report the fees as income on their personal tax return and pay taxes on that income at their marginal tax rate. Depending on the executor's other sources of income and their tax bracket, this could result in a significant portion of the fee being consumed by taxes.

On the other hand, beneficiary distributions from an estate are generally not considered taxable income. When a beneficiary receives a distribution from an estate, they essentially receive a portion of the assets the deceased individual intended for them to have. These distributions are not subject to income tax, as the assets are considered to have already been taxed either during the deceased individual's lifetime or through the estate tax process.

As a result, if an executor is also a beneficiary, accepting a fee for their services could reduce the total amount they receive from the estate. The fee is subject to income tax, while the same amount received as a beneficiary distribution is tax-free. In this situation, it may be in the executor's best interest to waive their fee and instead receive a larger tax-free distribution as a beneficiary.

Frequently Asked Questions

What is an executor, and what do they do?

An executor is the person responsible for managing the estate of a deceased person. They are tasked with settling the estate according to the deceased person's will or state laws. This includes managing and identifying assets, paying off taxes and other debts, and distributing the remaining assets to the named beneficiaries.

How are executor fees determined?

Executor fees are typically determined by state law, the size and complexity of the estate, and the executor's professional experience. Some states have statutory fee schedules outlining the percentage an executor can charge based on the estate's value, while others allow for "reasonable" fees that may require court approval.

What factors influence executor compensation?

Several factors can influence executor compensation, including state-specific laws, the size and complexity of the estate, the time and effort required to settle the estate, and the executor's professional experience. Larger and more complex estates often require more work and may justify higher fees.