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San Antonio Express-News
May 3, 2002

How are Executor's Fees Handled?

© 1989-2009, Paul Premack

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Dear Mr. Premack: In Texas, is the Executor of a Will automatically paid a fee (percentage or otherwise) out of the estate for his/her services? If not, is it a good idea to list the executor as a beneficiary to make sure payment is received for the services? And then what about the alternate executor, who may never need to perform any services at all? MKB

There are two ideas running through Texas law about Executor’s fees. First, the legislature has given a very specific set of rules to determine what fees are appropriate. Second, the courts have recognized that the statutory scheme can be disregarded if the Will itself sets different rules for handling the fees.

Under the statutory scheme, the Executor is "entitled to receive a commission of five per cent." That begs the question, "per cent of what?" Calculating the Executor’s fee under the statutory scheme can be very involved.

For instance, the statutory scheme forbids any fee "for receiving funds … which were on hand or were held … in a financial institution or a brokerage firm." That means that the Executor cannot legally charge anything for just going to the bank or brokerage to get and distribute the estate’s money. On the other hand, the Executor can charge 5% for selling real estate, for collecting debts owed to the estate and for paying debts owed by the estate.

The statutory scheme can be easily changed by setting different rules in the Will. For instance, in the Texas case LEE v. LEE, the Will said the Executor should be paid a "reasonable fee." The Executor sold real property belonging to the estate for about $27.5 million, and took a fee of about $2.8 million. One heir sued the Executor, claiming that fee (about 10%) was too high. The court decided that the terms of the Will overrode the statutory scheme; that the 10% fee was allowable because it was within the Will’s "reasonable fee" limit.

So the answer to your question "is the Executor of a Will automatically paid a fee?" is this: If the Will says nothing about a fee, the Executor can automatically charge a 5% fee for certain transactions. If the Will says something else about fees, then the terms of the Will must be followed (even if the resulting fee is less, or is more, than the statutory 5% fee).

Is it a good idea to list the Executor as an heir, to be sure he/she gets paid? That depends. If the Executor is someone you would ordinarily include as an heir, then that inheritance is adequate; no additional fee need be allowed unless you really want to give additional funds.

On the other hand, if the Executor is someone you would not ordinarily include as an heir, you might reduce the Executor’s future income taxes by deciding to give an inheritance in lieu of a fee. One snag: if that person declines to act as Executor, he/she may get the inheritance without doing any work. The alternate Executor may do all the work without pay.

As a consequence, the best approach is to either 1) say in your Will that there is to be no fee at all, or 2) say in your Will that there is to be a specific percentage of the gross estate as a fee or a specific dollar amount as a fee. Doing so ensures that the Executor or the Alternate (whoever actually serves) will be the one who gets paid, and that calculating the fee will be much easier than it would be under the statutory scheme.

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Disclaimer: This column answers a specific legal question offered by an individual in the South Texas area. The answer may or may not match your individual situation. Be careful not to treat this column as specific legal advice that meets your individual needs. It may give you a solid basis for discussion with your own attorney. Also, please be aware that laws change. You should consult with your personal attorney before you take any action on this or any legal issue.

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