“You want to charge what?!” In a perfect world, no executor would ever hear these words (and no beneficiary would feel the need to utter them). Unfortunately, issues involving executor’s fees often do arise.
Whether you are crafting your own will, agreeing to act as an executor, or approving accounts as a beneficiary, it is imperative to understand how executor’s fees are set. Fees can be set in a will itself, but if they are not specifically set out in a will, the Trustee Act limits fees to a maximum of 5% of the value of estate assets, plus a calculation for ongoing management if that becomes necessary.
It is a misconception that executors are entitled to 5%; this is the maximum fee under the statute.
Let’s assume your executor sells your assets for a total of $300,000, distributes some of the estate immediately but then must hold $200,000 in trust for three years before distributing to certain beneficiaries. Assume the executor invests that money and the estate earns $15,000 in interest each year. Maximum fees would be:
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In determining what to charge as an executor, and what to approve as a beneficiary, the size of the estate, complexity of the matters dealt with, time and skill required to finalize matters and level of success achieved are all to be taken into consideration. Every beneficiary whose inheritance is affected by the fee must approve the executor’s fees, or the executor will have to apply for the Court’s approval before taking the fee and finalizing the estate.