If a beneficiary, creditor, or other interested party believes that an executor is taking unreasonable fees from the estate for their duties as an executor, they may be entitled to object to an executor’s fees. However, the standard for reasonable executor fees varies by jurisdiction and in many cases is highly discretionary.
An executor is entitled to charge the estate a fee for their work as an executor. The will or state law may determine how much an executor may charge, but generally the rule is that an executor may charge a “reasonable” fee. A fee may be reasonable if it has some relation to the complexity of the estate, the time required to administer the estate, or the responsibilities that an executor assumes while managing the estate. An executor may also be permitted to charge the estate a greater fee if the estate benefits from a particular skill that an executor possesses, such as professional accounting skills.
Clear communication between executors and interested parties regarding executor fees may prevent later litigation.
An executor might derive their fees from a percentage of the estate, an hourly rate, or a flat rate. Any of these arrangements may be reasonable so long as it conforms with any applicable state laws. For example, some states explicitly prohibit an executor from basing their fees on a percentage of the estate’s assets. A will may also prescribe an appropriate fee or hourly rate for the executor.
Objections to Executor Fees
Generally, any interested party may object to an executor’s fees if they believe that the fees charged to the estate are unreasonable. The probate court may analyze a number of factors alongside any existing state laws to determine whether an executor’s fees are reasonable. The court may take into account the complexity of the estate and any special skills that the executor possesses. It may also consider the hours that the executor has logged working for the estate, even if the executor is not charging the estate on an hourly basis. In some cases, the court may compare the executor’s fees to the executor’s hourly rate at their normal job. A court may find an executor’s fees more reasonable if the executor had successfully saved the estate money or increased the value of the estate. It may be more likely to find an executor’s fees reasonable if the executor’s administration was efficient and in good faith.
Evidence that an executor’s fees are unreasonable may include evidence that the executor spent very little time managing the estate, that the estate’s assets were not complicated, or that the executor was negligently or purposefully inefficient in guiding the estate through probate. Evidence that the executor billed the estate twice for their own work or billed the estate for work performed by another individual may also be compelling.
An executor will have an easier time defending their fees if they keep detailed records of their work on the estate. They should also preserve any evidence of the estate’s complexity, the hours spent administering the estate, and any actions that saved the estate money or increased the estate’s value.
An executor facing a fee dispute because the estate does not contain enough assets to pay all of its debts should check state law to determine the priority of debts. Executors’ fees are often prioritized over other kinds of debts and may be paid even if it means that another creditor will be out of luck.