This column first appeared in the San Antonio Express-News on April 26, 2016.
Dear Mr. Premack: I was named as Executor in my neighbor’s Will. He has no family and I said I would do it. Can I be paid for my duties when the time comes? – OO
Texas law has two patterns for paying Executors. First, the Estates Code has a provision to determine what fees are appropriate. Second, the statutory provisions can be disregarded if the Will itself sets different rules for handling the fees, or if the Will bans a fee altogether.
Under the statutory provision, the Executor is “entitled to receive a five per cent commission.” 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 “receiving funds … that were, at the time of the testator’s or intestate’s death, either on hand or held … in a financial institution or a brokerage firm.” That means that the Executor cannot 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.” One heir sued the Executor, claiming that fee (about 10%) was too high. The court decided 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.
The best approach is for the Will to either say there will be no fee, to say that there is to be a specific percentage of the gross estate as a fee, or to set a specific dollar amount as a fee. Doing so ensures that the Executor can be fairly paid, and is much easier than calculating the fee under the statutory scheme.