Settling an estate can be a long and messy affair, and an executor is entitled to monetary compensation for the considerable time and effort that goes into it. If you’re named as executor of an estate, you have the right to refuse the job, but most people feel that being an executor is an honor as well as an obligation, and they're reluctant to turn down the request. If a person dies intestate, or without a will, a court will appoint an administrator, who is similar to an executor and has the same responsibilities.
Duties of an Executor
Understanding what’s involved in settling an estate is essential to deciding whether the compensation you’re likely to receive is reasonable for you, or whether you’d prefer not to take on the task. As executor, you must read the will carefully, locate all assets that are part of the estate, and determine who and where the beneficiaries are. You’ll need records of all the deceased’s bank accounts, mutual funds, real estate holdings, insurance policies and other investments, as well as appraisals of artwork, furniture and other personal property. It’s also your responsibility to inform creditors of the testator’s death, pay off his debts from the assets in the estate, file tax returns for the estate, determine how much is left after all accounts have been settled, and distribute the funds and property that remain to the beneficiaries.
A will frequently specifies how much the executor should be paid for his efforts. A reasonable amount would be at least the same as the amount provided for by state law, which varies from about 2 percent to 6 percent of the value of the estate. For example, in Pennsylvania, state law stipulates that the percentage can be between 1/2 percent and 7 percent depending on the size of the estate, according to the website of the law firm of Unruh, Turner, Burke & Frees. Sometimes the testator stipulates that the executor should be paid nothing at all. If there is no information in the will about executor compensation, or if there is no will, state law will determine how much compensation the executor or administrator receives. Typically, the percentage declines as the value of the estate goes up, so an estate of $100,000 would pay a higher percentage than an estate of $1 million.
Most estates are complicated enough that it makes sense to hire an attorney to help you handle all the details. The attorney may charge an hourly rate, which can vary from about $100 an hour to as much as $400 an hour, depending on where the attorney practices and how experienced he is, according to Lawyers.com. Most attorneys will ask for a retainer, an amount that you have to pay upfront and from which hourly charges and other fees are deducted as they accumulate. Some lawyers will ask for a percentage of the value of the estate instead of payment for billable hours. A reasonable charge would be about 5 percent for a small estate and about 3 percent for a larger estate.
If someone asks you to be the executor for his estate, ask to see the will while the person is still alive. This can be a delicate situation, but if you explain that you want to understand what your responsibilities will be and make sure that you’ll be able to do the best job possible for him, this should smooth things over. Being an executor of an estate carries a fiduciary obligation, which means you have a legal obligation to act in the best interests of the deceased. It also opens you up to being sued by the heirs if they’re unhappy with your performance, so it’s a good idea to know what you’re getting into before accepting the job.