What Can an Executor Legally Charge the Estate for in Texas?

By Heather Frances J.D.

When a person dies in Texas, some or all of the estate's assets will go through a court probate process before being passed down to the decedent's beneficiaries. In most cases, the decedent names a trustworthy person in his will to administer the estate. This person, called the executor, acts as a representative of the estate, guiding it through the probate process. This can be a time-consuming and expensive process for the executor, so Texas allows compensation for performing executor duties.

Probate

The probate process begins when an executor named in a decedent's will submits the will to probate court. The court will almost always appoint an executor the decedent nominated unless someone successfully challenges that nomination. Among other duties, the executor is charged with gathering and inventorying the estate assets, paying the decedent’s final debts and distributing the remaining property to beneficiaries as instructed in the will.

Compensation Options

In Texas, a decedent may spell out the specific amount of compensation an executor should receive in the terms of his will. If the will does not specify an amount of compensation, rates set by the Texas Probate Code will apply. Under the law, executors are entitled to receive five percent commission on the amounts they collect and pay out in cash while administering the estate, as long as the court finds the executor's duties were properly carried out. However, an executor's compensation may not exceed five percent of the total fair market value of the estate.

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Compensation Issues

Because Texas' method for determining executor compensation is based completely on cash flow through the estate, it can create some unusual results. The Texas Probate Code identifies several types of assets that are specifically excluded as cash for executor compensation purposes: money the testator had on hand at the time of his death; money held for the decedent in a checking account, savings account, certificate of deposit or money market account; life insurance proceeds; and bequest payments made to beneficiaries. To fairly compensate an executor, Texas probate courts are permitted to reasonably compensate an executor if the statutory compensation method is unreasonably low or the executor manages a business on behalf of the estate.

Independent Executors

The Texas Probate Code does not specifically address whether the five percent compensation rate may be applied to executors acting independently, without probate court supervision. In such cases, executors may determine their fees without using this formula; executors may request reasonable compensation or reach an independent agreement with the beneficiaries.

Expenses

Executors often incur ordinary expenses during estate administration, such as the cost of selling or storing personal property. The executor is entitled to reimbursement from the estate for such expenses as long as they are reasonable and necessary. However, if the executor expends triple the amount normally spent for a certain service or spends money on something that isn't necessary for administering the estate, for example, the beneficiaries may challenge the reimbursement. Attorneys fees incurred by the executor for defending claims against the estate also constitute reimbursable expenses.

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Executor Compensation for Executing Wills

References

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Can an Executor Charge a Beneficiary for Duties?

The executor of an estate is normally named in a valid will, appointed by the overseeing probate court, and is generally a family member or friend of the deceased. A lawyer or other professional can also be named as an executor. An executor is responsible for paying the deceased’s debts and distributing the estate assets in the manner described in the will. He may also need to hire others, such as appraisers, to help him value or sell assets in the estate. These services are also paid for by the estate. An executor can be paid for his services, but he is not compensated directly by the beneficiaries. The estate pays for the executor’s services, which diminishes the amount of assets the beneficiaries get.

What Expenses Can an Executor Take for Estate Tax?

When a person dies, everything he owns is included in his gross estate. For federal tax purposes, the entirety of the gross estate is not taxed. The executor is permitted to make deductions from the gross estate, decreasing the eventual estate tax obligation. An important set of deductions are expenses related to the estate. It is important to note that only estates valued over $5.12 million are required to pay federal tax. Consider consulting with a licensed attorney or certified public accountant if you are an executor and required to prepare an estate tax return.

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