Working for Peanuts – Executors Have to Push for Payment
Happily for executors everywhere in our wonderful state of Texas the law against involuntary servitude is still in place. That means you are entitled to be paid for your service as an executor.
How much? Grab a cup of coffee and prepare to settle in – the answer is not so simple.
A well-drafted will usually has a paragraph about compensation. It may be hourly, a flat fee, a percentage of the estate, or a combination of these. That provision is binding on the executor. If you don’t like the amount, then your recourse is to refuse to serve as executor. Once you accept the appointment, you are stuck.
Is the compensation paragraph conspicuously absent? Then think five percent. If the will is silent, uses the words “reasonable compensation,” or there is no will, then your pay is set by a statute that sets out a 5% commission on all sums that you receive in cash or pay out in cash. There is a huge carve-out, however: you aren’t entitled to be compensated for cash on hand, or held in the decedent’s name in a financial institution or a brokerage firm at the time of his death. Also carved out are the proceeds of a life insurance policy and any cash that you pay to an heir or beneficiary as part of distribution of the estate. And there is one more caveat, in that the commission is capped at 5% of the gross fair market value of the estate.
The idea is that you are going to be paid only on what you actively manage, and not on the funds that just fall into your hands. The court can increase the percentage if you manage a farm, ranch, factory or other business of the estate, or if the formula results in an amount that is unreasonably low. There is no guidance in the statute on what is considered “unreasonably low,” but some courts routinely raise the amount awarded if the estate is unusually complicated, challenging or combative. Think of the additional amount as battle pay.
For professional fiduciaries like attorneys, the court may grant fees on hourly rate, and can designate different fees for fiduciary services and legal services.
In order to receive any payment at all, you have to jump through some procedural hoops. You have to file a motion with the court and get a court finding that you have taken care of and managed the estate in compliance with your statutory standards. No court finding, no fee.
Your fee may also be up for dispute or leverage by a creditor, heir or legacy. Any interested party, or the court on its own motion, can ask that your commission be cut or denied. The court will do just that if it finds that you did not take care of the estate prudently or if you are removed as executor.
If you are an executor, you should not have to work for free. Do not be afraid to ask for payment.
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The information contained in this article is general information only and does not constitute legal advice.