Executor Fee

As estate attorneys, we are often asked the question: “what happens to my property after I die?”  This simple question is often the gateway to a discussion about the importance of having an estate plan. An estate plan provides instructions for how your property will be disposed of upon your death. The most common mechanism for providing these instructions is through a Last Will and Testament, and the most important person in the process of settling an estate through the probate of a Will is the personal representative or executor. The executor’s job is sometimes a thankless one, and it is very much like running a small business or managing a project so long as the estate remains open. Alabama law recognizes this burden and provides that executors are entitled to compensation for services rendered.

Alabama Code Section 43-2-848 covers how executors are compensated.  The general rule is that the compensation should be reasonable which is weighed according to the following factors:  1) novelty and difficulty of the administrative process; 2) the skill requisite to perform the service; 3) the likelihood that accepting employment as executor will preclude other employment; 4) customary fees charged in the locality for similar services; 5) amount involved and results obtained; 6) requirements imposed by the circumstances and the condition of the estate; 7) nature and length of the professional relationship with the decedent; 8) experience, reputation, diligence and ability of the person serving; and 9) the liabilities, risks and responsibilities of the person serving. Furthermore, the total compensation under this provision shall not exceed two and one half percent (2.5%) of the value of all property received and two and one half percent (2.5%) of the value of all property disbursed. This is commonly referred to as “2.5% in and 2.5% out”. This section also provides that the court may allow for additional compensation for “extraordinary services performed for the estate”.  Moreover, the beneficiaries may enter into a written agreement with the executor to pay a fee, which may be more or less than what the statute provides.

The law recognizes that not all estate administrations are the same. Many times there is very little complexity and the duties of executor are minimal. The converse can also be true if there are issues that exceed the navigation of the probate process itself and extend into the areas of selling or leasing property; liquidating financial accounts; paying off creditors; dealing with complex income and estate tax issues; or will disputes and litigation. In the latter situations, the executor’s role may be more intricate, which in turn implicates many of the factors listed above, thus resulting in a higher executor fee. In these cases, it may be wise to attempt to reach a compensation agreement with the beneficiaries on the front end in order to set expectations. Of course, this may be unrealistic if the beneficiaries do not get along or if there are disputes regarding the will. In such cases the final compensation becomes part of the litigation, and will be decided upon settlement or final judgment.

If you are named executor of a will, understand that you should not try to navigate these issues without legal advice and representation. Our lawyers at Caldwell Wenzel & Asthana, PC have years of experience in a myriad of estate administration and estate dispute cases. We will help you with the probate process step by step and ensure you get the compensation you deserve.  Call now to find out how we can assist with the administration of an estate; reduce your burden; and make sure you are treated fairly.