Under the Texas Probate Code, standard compensation for an executor of an estate is a five (5%) percent commission on all amounts received or paid in cash. This is known as the Texas two-step executor's compensation. However, if the estate is large enough to owe federal assets and the personal tax rate of the executor is lower than that of the estate, accepting compensation can be a good tax measure. In this case, it is recommended to consult an estate attorney.
If the will does not establish a charge, it is up to the executor to determine what is reasonable under the circumstances. The probate court is unlikely to argue with the bill, unless the beneficiary of the estate objects. Some states have statutory rules about how much an executor can claim, and if these are followed, objections from beneficiaries are unlikely. Even if there are no statutory rates, it may be possible to charge a percentage of the value of the estate. For example, if real estate is sold, a percentage of the sale price can be claimed.
If there are no objections from beneficiaries, there will be no problem. Typical executor fees are intended to compensate for the time and energy required to finalize another person's affairs. They are calculated as a percentage of the estate, a flat rate, or an hourly rate, according to state law. Texas law does not allow compensation to an executor for cash available at the time of death, including checking accounts, savings accounts, certificates of deposit, money market accounts, collecting life insurance policy income (unless difficult to obtain), or paying bequests in cash to beneficiaries. The executor could receive more than five (5%) percent commission if the type of work involved is difficult. If the estate is large enough to owe estate taxes and the personal tax rate of the executor is lower than that of the estate, accepting compensation can be a good tax measure.
In this case, it is recommended to consult an estate attorney. If there is no will or no provision governing executor's fees in a valid will, state law governs how much should be paid. North Carolina law says executor's fees are at the discretion of the clerk of the superior court but should not exceed five percent (5%). Executors receive 5% of the value of any money they actually receive or pay in cash while performing their tasks. Being an executor requires a commitment to work on behalf of beneficiaries for months or even years. To fulfill obligations as executor of an estate, authority must first be granted through a testamentary letter.
Many states agree that an executor is entitled to reasonable compensation for services rendered. Some executors may choose to waive payment, especially if they are going to receive estate assets; generally speaking, taxes on an estate are not due unless you live in one of six states with a state inheritance tax. In states that require a specific percentage of the estate, there may also be an “extraordinary fee” if duties have gone beyond usual situations such as being involved in litigation or tax disputes on behalf of the estate. Executors' fees are usually stipulated in a person's last will and testament and if there is no will then amount paid to executor will depend on state law which may have guidelines for how much should be paid. Because an estate cannot be distributed until will is proven, length of probate process directly affects beneficiaries. In this determination, court may consider factors such as complexity of estate and issues involved and time spent by executor carrying out tasks among others.
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