An executor of a will generally receives compensation for his work. Each state has laws that govern how an executor is paid. The executor is paid out of the probate estate, rather than from the pockets of the beneficiaries, and may be paid a percentage of the estate, a flat fee or a hourly rate, depending on state law.
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The executor of an estate has several duties. For instance, a typical executor is responsible for making an inventory of the estate, contacting creditors and beneficiaries, paying the estate's bills and making sure each beneficiary receives what the will leaves for him. An executor may also be required to file the estate's final tax returns or to defend the will against a will contest in court. These duties may take several months to complete, and require time, care and attention. The executor is compensated for the time and energy she spends making sure the work is done.
The amount of compensation an executor can earn for her work depends on the law where the will is probated. Many states offer the executor a small percentage of the estate's total assets as payment. For instance, an executor in Kentucky may receive up to 5 percent of the estate's assets. Other states, like California and Nevada, use a fee schedule set by law to pay the executor based on the size of the estate. Finally, states that use the Uniform Probate Code have no specific amount or rate set by law. Instead, these states leave it to the probate court judge to set a "reasonable" amount of compensation based on the size and complexity of the estate.
The executor receives his payment after all the estate's bills are paid, but before the estate is distributed to the beneficiaries listed in the will. Often, an executor must file paperwork with the probate court demonstrating that the bills have all been paid and that no new bills will arrive because the legal amount of time to file bills with the estate has passed. The court allows the executor to receive his compensation and distribute the rest of the assets only when it is convinced that the executor has finished settling the estate's debts and any will contests.
Many states allow the makers of wills to indicate how they wish the executor to be paid. For instance, you may indicate that the executor should receive a small flat fee, or that she should give up her compensation altogether. A probate court will usually uphold these requirements in your will as long as they do not conflict with state law. An attorney can help you draft this portion of your will. If you do not mention executor compensation in your will, your executor will be paid according to your state's law -- unless she chooses to give up her compensation.