Estate planning often involves drafting a will. One of the most important decisions in an estate plan is naming an executor or personal representative. In general, the executor is responsible for the administrative tasks associated with the probate process. His duties become effective when the person who wrote the will dies and the time comes to probate his estate. Commercial executors are available, but not required. The person writing a will can state the executor's compensation, but state laws govern how much he gets paid.
Duties of the Executor
The executor is charged with a number of critical duties. For example, she must find the will, file it with the probate court, petition the court to be appointed with the authority to act as the executor, notify the heirs and creditors of the decedent about the probate process, oversee the distribution of the estate and keep the court informed about developments in the estate. The executor must act in the best interests of the estate and could be personally liable for abusing her authority or otherwise failing to act in her capacity.
Executor Compensation Is Governed by Statute
State laws recognise the importance of the executor's duties and understand that he should be entitled to reasonable compensation for his services, but that the pay should not bankrupt the estate. State probate laws cap the amount of compensation an executor can receive. According to EstateSettlement.com, it is not uncommon for executors to receive between 2 and 4 per cent of the probate estate, with the percentage based on the size of the estate. In Montana, the executor was entitled to 3 per cent of the first £26,000 and 2 per cent of the value of the estate in excess of £26,000 (as of 2010).
Using Montana as an example, if an estate was worth £325,000, the executor would make 3 per cent of the first £26,000 ($1,200) and 2 per cent of the remaining £299,000 (or £5,980). On a £325,000 estate, an executor in Montana could make £6,760.
Additional Compensation Possible
State laws typically provide that an executor is allowed "reasonable expenses" for services that go above and beyond the statutory executor duties. For example, if the executor must get involved with settling a tax dispute or undertaking litigation to resolve a property dispute in relation to the estate, the court may allow additional compensation. The court must approve of all compensation.
Executor's May Work for Free
Executors do not need to be paid. If the person drafting a will wants to use a commercial executor, compensation is likely expected. However, it is not uncommon to name a friend or close relative to act as the personal representative. Individuals may also deny compensation since compensation is considered taxable income and must be reported on income taxes.