After the passing of a loved one, a common question by one of the children is: Can I get paid executor fees? If you are appointed the executor, or personal representative (as it is called in Massachusetts), of a deceased loved one’s estate, you may face many challenges. There are a number of duties for which you will be responsible, including gathering and securing the deceased’s assets and household belongings, paying debts and taxes, filing court paperwork, and making distributions to beneficiaries. The process can be time-consuming, complex, and emotionally draining. Even when everything runs smoothly, questions are likely to arise.
In most cases, the answer is yes, you are entitled to receive executor fees for your services. However, there are some issues to consider before you can receive payment from the estate. If there is a Will, the deceased may have specified the amount of compensation or prohibited executor fees. This latter situation sometimes occurs when the executor is a family member who is also a beneficiary under the Will. If the Will is silent regarding executor fees or the deceased dies without leaving a will, then executor fees are determined by state law. This is where things may get complicated.
Consider the case of Lawrence, who was appointed the personal representative of an estate in Massachusetts where the primary asset was a house subject to a small mortgage. Lawrence sold the house, paid off the mortgage, dealt with the contents of the estate, and the assisted his attorney with court paperwork. He also made distributions to the beneficiaries. He charged the estate $7,500, what he considered a fair price for his services. When one of the beneficiaries objected to the fee, the court denied the executor fee because Lawrence did not have any records to back up his executor fees.
Unlike in some states, where the executor fees are fixed amounts equal to a percentage of the probate estate, in Massachusetts the executor is entitled to “reasonable compensation” for services rendered. The executor fees can also be subject to approval by the probate court.
What exactly is “reasonable compensation” though? How do you determine for which services you are entitled to be paid executor fees and at what rate? There are no clear guidelines under the law in Massachusetts, but the probate court will consider factors such as the size of the estate, the time reasonably required to administer the estate, whether the services rendered were reasonably necessary, and the amounts usually paid to others for similar services.
So what does all this mean in practice? Most importantly, you must keep detailed records. Do not wait until the end of the process to attempt to compile a list of services performed. You will need to disclose your executor fees in the final accounting filed with the court and/or shared with the beneficiaries. When you do, you should include:
- a detailed record of the tasks performed
- the amount of time spent on each task
- the hourly rate billed for each task.
For example, a record that lists: “February 1, 2013: 2 hours at $25/hour preparing financial statement for accountant,” along with similar entires, are more likely to be approved by the court than: “$1,000 for bookkeeping services.”
Finally, keep in mind that any executor fees you receive are considered income and are taxable. If you want to avoid tax consequences, you have the option to decline compensation for your services.
Although it is an honor to be appointed or asked to serve as an executor, it is not a situation you should take lightly. Most often having the guidance of an attorney is necessary to avoid common costly mistakes. Contact us to discuss your rights and obligations.