It is a good idea to settle the matter of your will at some point. It helps the family during a very difficult time, and is a good way to plan for the future carefully and with the benefit of time. With the help of a Will Planning Lawyer, these matters can be fully established legally, so that this process flows as smoothly as possible when the time comes. And when that time comes, the professional assistance that is now needed is that of an executor.
As might be expected the subject of executor’s fees arises as a regular topic when administering an estate. Some family members, not wanting to deal with dissention in the ranks or believing their duty is to effectuate their parent or loved one’s wishes without compensation, forego payment sometimes to their dismay at a later date. The job of executor is a job after all and, although it might be made less complicated with the assistance of an experienced elder law or estates attorney, it carries certain responsibilities as well. Having served as an executor on more than one occasion myself as well as an attorney for estates I have an appreciation for those who assume the duties even when confronting unanticipated obstacles. Generally speaking I am a fan of payment for work performed in this as well as in other areas.
Having said this, there are certain guardrails that should be understood. Reasonableness is the standard and, as might be expected, one person’s understanding of reasonableness can vary widely from another’s. Organization and good records are helpful. An extremely high executor’s fee could be challenged although this kind of case does not happen often except where there is dissension among beneficiaries. Assistance from professionals can help to establish reasonableness and provide description of the work completed.
Pennsylvania standards. The Johnson Estate case. Forty years ago a Pennsylvania Common Pleas Court case, Johnson Estate, 4 Fid.Rep.2D 6, set a standard attempting to describe what might be “reasonable” in a given case. It was based generally both on the size of the estate and on distinctions regarding the assets themselves. It was not intended as a final answer but has, in any event, been frequently cited. Many cases have resulted in both much lower and much higher payments than would be justified under the Johnson Estate standards. Here are some ideas to explain what an executor/executrix does and a basis for his/her fees.
Serving as Executor – What Is Involved. One source describes the
executor’s job to include the following.
1. The executor may arrange the funeral, request burial or cremation, organize the memorial, and order death certificates.
2. The executor takes inventory which involves locating and organizing all estate assets and debts.
3. The executor goes through the formal process of being appointed. This is what is described as probate.
4. The executor or his/her agent or attorney sends notifications to family and friends, banks, credit card companies, and others, gets final balances on accounts. He/she determines who are the beneficiaries of the estate including (at least in Pennsylvania) the beneficiaries of non-probate assets such as IRA’s and retirement accounts.
5. The executor manages the estate. This can include dealing with realtors, title companies and attorneys to sell real estate (the estate attorney might also handle real estate) owned by the decedent and attending settlement. This can involve cleanout or hiring someone or a service to clean out, terminating utility service and subscriptions such as cable TV, and arranging for an orderly process to distribute personal belongings of the decedent.
6. The executor pays debts of the decendent after first determining whether they are valid and, if there are not enough assets in the estate to satisfy all the debts, he/she learns (or asks his/her attorney) which ones are to be paid in what order. Pennsylvania, for instance, has an order of priority to establish which creditors or types of creditors are paid in which order if there is not enough to satisfy all debts.
7. If the decedent was over age 65 in Pennsylvania it may be necessary to send a notification to the State to determine whether anything is owed under “estate recovery” for Medicaid payments made on behalf of the deceased.
8. Tax returns need to be filed. Here if the decedent used a regular accountant he/she could follow up with final federal and state tax returns. An elder law or estate attorney can handle inheritance and other taxes.
9. There should be an inventory. In Pa. an Inventory, although incomplete, is required to be filed with the Inheritance Tax Return as well.
10. Final distributions are made in accordance with the Will and with beneficiary designations generally. A final Family Settlement Agreement is often included with an informal accounting for the beneficiaries and a final status report filed. The executor/executrix can then rest knowing he/she has completed a job well done.
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.