Executor fees are charges for managing an estate during succession, usually based on the estate’s value and governed by law. Executors must document expenses and fees, and may hire professionals at the estate’s expense. Executors should be aware of tax implications and potential legal penalties for unreasonable fees.
Executor’s fees are the expenses charged by the executor for processing the inheritance during the succession. Family members and close friends who act as executors may choose to waive these fees, working for free as unpaid executors. The amount that executors can legally charge for the management of an estate is governed by law and statutes vary across jurisdictions. An attorney can provide information about a specific jurisdiction to people with questions about executor fees.
Typically, executor fees are based on the value of the estate. They can vary between 2 and 4% and, in some cases, a degressive rate may be charged. For example, a jurisdiction might allow a 4% executive fee for the first $100,000 United States Dollars (USD) of a property and reduce it to 3% for anything in excess of that amount. Executors who violate the statute by charging an unreasonable fee may be subject to legal penalties.
The executor must handle taxes as taxable income, something people should consider when agreeing to act as executors. Depending on the size of the estate, the amount earned can vary, but executive expenses could potentially push someone into a different tax bracket, resulting in a significant tax. Individuals who are asked to act as executors of wills should consult an accountant to discuss the financial and tax implications of the decision.
Executors of wills are accountable for their management of the estate through the probate process. Any expenses incurred must be documented and justifiable, and when the executor takes the fees earned for the management of the estate, this must also be documented. Executors manage estates on behalf of other people and therefore have a duty of care during the probate process. In some cases, the executor may be one of the heirs, as seen when the eldest adult child in the family is responsible for managing a parent’s estate. In these situations it is customary to scrupulously account for inheritance in probate so that there are no allegations of questionable behaviour.
It is important to be aware of other probate costs in addition to executor fees. Executors may retain the professional services of people such as appraisers, lawyers, cleaners, and so on, and may bill the estate for these services. Additionally, people may need to meet with lawyers separately to discuss the will and estate, and this will add to the costs associated with probate. Disputes over the terms of a will can also lead to more expenses.
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