Does The Executor Get Paid?

An Executor’s fee is the portion of a deceased individual’s estate paid to the decedent’s Executor for performing their duties in Probate Court. While the California Probate Code often refers to Personal representatives, the rules governing the obligations, liabilities, and compensation of Executors are the same as Administrators and Personal Representatives.

In California Probate Court, the Executor oversees and must be responsible for specific duties regarding the decedent’s estate. Ordinarily, these duties include, but are not limited to, the following:

1 – locating the assets that make up the estate;

2 – notifying the beneficiaries and heirs that the decedent has died;

3 – notifying the creditors of the decedent and paying off the deceased’s debts; and

4 – Transfer the remaining assets to the decedent’s beneficiaries or heirs.

All of this is done under the watchful eye of the Probate Court. In exchange for these services, Executors, Administrators, and Personal Representatives are entitled to compensation. Nevertheless, specific amounts that the Executor can receive as Executor’s fees can vary considerably, depending on the size and value of the estate.

In California, if the decedent has left a Will and the Will does not specify how Executor compensation should be calculated, the Executor must follow specific rules to calculate the amount of the Executor’s fees. These fees are typically calculated as follows:

Under California Probate Code section 10800, the Executor, Administrator, or Personal Representative typically receives statutory compensation based on California law calculated in the following manner:

    4% on the first $100,000;

    3% on the next $100,000;

    2% on the next $800,000;

    0% on the next $9M;

    5% on the next $15M; and

    As determined by the court, a reasonable amount for all amounts above $25M.

Last Will vs. State Law

Some states allow for the last Will and testament to explain how an executor should be compensated; this may be a flat fee stated in the document, or the Will may specifically leave the determination up to state law.

If no will or provision addresses the executor fee in a valid will, state law governs how to pay an executor.

Determining Executor Fees by State

Each state has its laws concerning executor fees. Washington state, for example, provides that executors are entitled to “reasonable” compensation. In this determination, a court may consider factors such as the complexity of the estate and issues involved, and the time the Executor spent carrying out the duties, among others. Each state has its guidelines for determining what is “reasonable.”

California has one of the most detailed schemes, which provides that the executor fee is four percent of the first $100,000 of the estate, three percent of the next $100,000, two percent of the next $800,000, one percent on the next $9 million, one-half of one percent on the next $15 million, and a “reasonable amount” for estates above $25 million.

According to California Probate Code section 10800(b), the value of the estate accounted for by the executor “is the total amount of the appraisal value of property in the inventory, plus gains over the appraisal value on sales, plus receipts, fewer losses from the appraisal value on sales, without reference to encumbrances or other obligations on the estate property.”

In other words, if the only asset in the estate is a piece of real property appraised at $750,000, that property has a loan or mortgage on it with a balance owed of $450,000. This estate would be similar to Example #2 above because the property’s appraised value is $750,000 “without referent to encumbrances or other obligations on the estate property.” Therefore, the Executor would be entitled to the Executor’s fees of $18,000.

Nevertheless, suppose the decedent’s Will makes a specific provision for the compensation of the Executor. In that case, the compensation provided in the Will shall be the only compensation for the services of that Executor. However, the Executor can petition the court for authorization to receive a higher amount than the amount specified in the Will, and in such instances, “if the court determines that it is to the advantage of the estate and in the best interest of the persons interested in the estate,” under California Probate Code § 10802(d), the court may authorize the Executor to receive a more significant amount “than the amount provided in the will.”

Executor Fees and Taxes

A final question you might be wondering is, “Are estate executor fees taxable income?” The answer is yes, they are, and this is one big reason an executor may choose to waive payment.

An executor may always decline to accept a fee – some people find taking money to serve as an executor of a loved one’s estate awkward. But refusing executor fees makes particular sense when the Executor is also set to inherit from the estate. This is because executor fees are considered taxable income for state and federal taxes, whereas inheritances are generally not.

While the above gives a general overview of executor fees, you may find it beneficial to consult with an estate planning attorney knowledgeable about your state’s laws as you navigate the probate system. With certain exceptions, the probate attorney for the Executor usually receives the same amount as the Executor’s statutory fee.