How are estate executors compensated for their work?

Posted by iLawyer on Aug 28th, 2022 Estate Planning, Firm News

If you’re asked by a family member or close friend to be the executor of their estate after they pass away, you’re likely somewhat flattered that they’re trusting you with this responsibility. However, it’s crucial to remember that even if they have a well-crafted estate plan, being an executor requires time, patience, skills and work.

It’s a job – and one that you deserve to be compensated for. That’s why executor compensation is covered in probate law.

Standard compensation under Texas law

Texas law states that executors are “entitled to receive a five percent commission on all amounts that the executor or administrator actually receives or pays out in cash in the administration of the estate.” That compensation cannot exceed “five percent of the gross fair market value of the estate subject to administration….”

If someone had legal guidance when developing the estate plan, that compensation should be detailed there. However, it’s the law even if an executor has to be appointed by the probate court because there was no will or an executor wasn’t named for some reason.

Can an executor get more (or less) compensation?

Sometimes, the job of an executor is unusually difficult. The law also provides for “reasonable compensation” for things like “unusual efforts to collect funds or life insurance.” If you believe your work warrants more than is provided for in the estate plan, you have a right to ask the probate court for it.

The probate court, if warranted, can deny an executor compensation if they haven’t “taken care of and managed estate property prudently” or if they’re removed from the position.

Sometimes family members who are receiving an inheritance decline to accept compensation. The money then stays in the estate. Since executor compensation is considered income, they would need to pay income taxes on it.

If you have questions or concerns about your compensation as an executor, you may want to seek legal guidance.