Naming an Executor
When drawing up a will, most people name an executor. This person takes over the estate upon the death of the will maker and accepts legal responsibility for carrying out the will's instructions. The executor must submit the will to probate, if state law requires it, and has the option of hiring an attorney to assist in the process if a lengthy probate case looms. If someone dies without a will, a probate court will name a personal representative or administrator; this person might be a relative, spouse or attorney who voluntarily accepts the assignment.
An executor -- who must be notified of his appointment when the will is prepared -- notifies surviving relatives, beneficiaries and creditors when the death occurs. The executor is also responsible for paying any outstanding debts of the deceased and transferring remaining assets to beneficiaries. Creditors have a deadline within which to file their claims; the executor has the right to dispute these claims in probate. The executor may also transfer title to real estate and other property to beneficiaries or, if necessary, sell property in order to satisfy outstanding claims against the estate. These issues can demand a lot of time and attention; an executor may need to resolve disputes among beneficiaries, negotiate with creditors, prepare tax returns, file pleadings in probate and attend hearings. For this reason, state laws universally recognize the right of executors to charge a reasonable fee for their services.
State law sets out the statutory guidelines for executor fees. In Virginia, for example, the law allows "reasonable compensation" but the amount is set by local courts. Fairfax County sets the fee at 5 percent of the estate value and 5 percent of any income it generates for estates up to $400,000 in value. The percentage declines as the estate grows; for the next $300,000 in value, compensation is limited to 4 percent; the next $300,000, 3 percent; and any amount over $1 million, 2 percent. In Nevada, the law sets a statutory fee of 4 percent of the first $15,000 of an estate; 3 percent of the next $85,000; and 2 percent of the amount over that. Some states also require executors to purchase an "executor bond" that insures against any fraud or misconduct on the executor's part; the charge for the bond typically varies with the size of the estate.
Executor Legal Issues
Executor fees are subject to approval by the probate court overseeing the estate. In some cases, usually involving spouses or close relatives, there is no executor fee involved (particularly if the executor is also named as a beneficiary of the will). Beneficiaries have the right to contest the amount of the fee and request a hearing to decide the issue; the executor may also petition for his own replacement if there is a conflict of interest or other legal or personal issue that would interfere with the administration of the estate.