The executor or administrator of an estate is responsible for settling the probate estate.
The executor or administrator of an estate must deal with a lot of issues: paying all the debts and taxes, expenses, inventorying the assets, etc.–not to mention potential liability if these things are done incorrectly.
An estate may take months, sometimes years, to administer.
A key question for someone who has been appointed as an executor of a will or a probate estate is, “Do I get paid for this work?”
The answer is yes, an executor fee is charged for carrying out these important tasks. As explained below, ultimately, the specific amount of compensation for an executor in Texas will depend on the circumstances of the estate, the assets involved, and the court’s assessment of the executor’s services.
Dependent vs. Independent Administrations
Texas law allows for dependent and independent administrations.
- Dependent Administration: In a dependent administration, the court provides more oversight and involvement in the administration process. The personal representative appointed by the court, often referred to as an executor or administrator, must seek court approval for most actions related to the estate, including the sale of assets, payment of debts, and distribution of assets to beneficiaries. The court supervises and approves the actions taken by the personal representative throughout the administration process.
- Independent Administration: In an independent administration, the court’s involvement is reduced, and the personal representative has more authority and flexibility in managing the estate. Independent administration is typically allowed when the deceased person’s will specifically grants independent administration powers or when all the beneficiaries agree to independent administration. With independent administration, the personal representative can take various actions without court approval, such as selling assets, paying debts, and distributing assets to beneficiaries, making the administration process more efficient and less burdensome.
The Texas Estates Code provides the compensation regime for dependent administrations. It does not provide rules for independent administrations.
The specific fee or compensation for a personal representative in an independent administration would generally be determined through negotiation or agreement among the interested parties, such as the beneficiaries and the personal representative.
The amounts for dependent administrations are often used as guidelines for the amounts to pay in independent administrations. If the parties cannot reach an agreement on the amount or there is a dispute, the parties can ask the court to make the award–and the court will usually apply the dependent administration rules in doing so.
Standard Executor Compensation
Sec. 352.002 of the Texas Estates Code establishes the standard compensation for executors, administrators, or temporary administrators who have managed an estate.
They are entitled to a commission of five percent on all amounts they receive or pay out in cash during the estate administration. This is referred to as the five-and-five rule.
However, there are limitations to this commission. It cannot exceed five percent of the gross fair market value of the estate being administered, and it is not applicable in certain situations. The exceptions include funds held in financial institutions or brokerage firms, collecting life insurance proceeds, and distributing cash to heirs or legatees in their capacity as such.
Alternate Executor Payment
Sec. 352.003 provides for an alternate method of compensation. It says that the court has the authority to allow reasonable compensation to executors, administrators, or temporary administrators for their services in situations where they manage specific aspects of the estate, such as a farm, ranch, factory, or other businesses associated with the estate.
Additionally, if the compensation calculated under Section 352.002 is deemed unreasonably low, the court may award alternate compensation.
The Judicial Override
Sec. 352.004 addresses the denial of compensation. It says that the court has the power, upon application by an interested person or on its own initiative, to wholly or partially deny a commission that would have been allowed.
This denial can occur if the court finds that the executor or administrator has not prudently managed the estate property or if they have been removed.
Example of Texas Executor’s Fees
Suppose John is appointed as the executor of his late father’s estate. The estate has a gross fair market value of $1,000,000, and during the administration process, John collects $500,000 in cash, pays out $200,000 in cash for various expenses and debts, and distributes $200,000 in cash to the heirs.
Based on Section 352.002 of the Texas Estates Code, John would be entitled to a commission of up to five percent on the cash amounts he received and paid out during the administration. In this case, the commission would be calculated as follows:
Commission = 5% of (Cash Received + Cash Paid Out) Commission = 5% of ($500,000 + $200,000) Commission = 5% of $700,000 Commission = $35,000
Therefore, John’s maximum commission, based on the standard compensation provision, would be $35,000 for his services as the executor.
It’s important to note that this example assumes that John has managed the estate in compliance with the standards outlined in the Texas Estates Code. The court may consider additional factors when determining the final compensation amount, such as the complexity of the estate, the time and effort expended by the executor, and any extraordinary efforts made in collecting funds or managing the estate’s assets. These factors could potentially justify a higher compensation amount if approved by the court under the alternate compensation provision in Section 352.003.
Reimbursement of Expenses
The Texas Estates Code also addresses the expenses of personal representatives and others involved in the administration of estates.
Section 352.051 states that a personal representative of an estate is entitled to receive necessary and reasonable expenses as well as reasonable attorney’s fees, subject to proof satisfactory to the court.
These expenses and fees are granted for specific purposes related to the administration of the estate. The personal representative can seek reimbursement for expenses incurred in preserving, safekeeping, and managing the estate. Additionally, they can request compensation for costs associated with collecting or attempting to collect claims or debts on behalf of the estate. Furthermore, if the estate has a title or claim to certain property, the personal representative may seek reimbursement for expenses incurred in recovering or attempting to recover that property.
Reasonable attorney’s fees, which are necessarily incurred in connection with the proceedings and management of the estate, are also included in the entitlement.
Hire a Lawyer to Probate a Will in Texas
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The content of this website is for informational purposes only and should not be construed as legal advice. The information presented may not apply to your situation and should not be acted upon without consulting a qualified probate attorney. We encourage you to seek the advice of a competent attorney with any legal questions you may have.