Executor Compensation: Can You Be Paid for Settling an Estate?

The Unpaid (or Paid) Job of Settling an Estate

When a family member passes away, the immense responsibility of settling their affairs almost always falls on a grieving relative or a close family friend. This position—known officially as an executor, personal representative, or administrator—is far more than an honorary title. It is a legally demanding, deeply time-consuming job that can take hundreds of hours spread across a year or more. From securing the deceased's physical property and identifying hidden bank accounts to filing complex tax returns and dealing with demanding beneficiaries, the workload is practically a part-time job.

Given the massive scope of the work, a common and completely valid question arises: Can I be paid for doing this?

The direct answer is yes. You are legally entitled to executor compensation for the time, energy, and liability you take on when settling an estate. In fact, most state laws and probate courts expect the executor to be paid from the estate before beneficiaries receive their inheritances.

However, the reality of how you get paid, how that payment is calculated, and whether you should actually take the money is highly complex. The legal calculation methods for an executor fee vary wildly depending on the state where the probate is taking place. Furthermore, the federal tax implications—specifically the difference between taking money as taxable income versus taking it as a tax-free inheritance—mean that claiming your legally permitted fee isn't always the smartest financial move, especially for family members who are also beneficiaries.

In this comprehensive guide, we will explore exactly how an executor gets paid, how different states calculate the personal representative compensation, the critical tax traps you must avoid, and the step-by-step process for legally waiving your fee if you choose not to take it.

Look at the Will First: How Wills Override Default State Laws

Before you start researching state statutes or calculating hourly rates, the very first place you must look to determine your executor compensation is the deceased person's Last Will and Testament. In the eyes of the probate court, the specific instructions written in a valid will generally override default state laws regarding compensation.

When reviewing the will, you will typically encounter one of four scenarios regarding your estate administration fee:

1. The Will Specifies a Fixed Dollar Amount

The deceased may have explicitly written, "I direct that my Executor shall receive a flat fee of $5,000 for their services." If this is the case, the court will generally honor this amount, regardless of how much time you actually spend on the estate. While this provides clarity, it can sometimes be a disadvantage if the estate turns out to be a multi-year, highly contentious mess that requires hundreds of hours of work.

2. The Will Specifies a Percentage

Some wills set a specific percentage of the estate's value, such as, "My Executor shall receive compensation equal to 2% of the total value of my probatable estate." This scales with the size of the estate but still may not accurately reflect the actual labor required.

3. The Will Demands You Serve Without Compensation

It is not uncommon for parents to write into their wills that a child serving as the executor must do so "without compensation." The assumption is usually that the child will be inheriting a portion of the estate anyway, so they shouldn't take a fee off the top. If this is written into the will, you generally cannot claim a fee unless you formally renounce the compensation clause and petition the court for a reasonable fee (a process that varies by state and is not guaranteed to succeed).

4. The Will Is Silent on Compensation

This is the most common scenario. Many standard will templates name an executor but say absolutely nothing about how they should be paid. If the will is silent on the matter, or if the deceased died without a will (intestate), the rules of compensation default entirely to the laws of the state where the probate court is located.

If you are just stepping into this position and feeling overwhelmed by the legal jargon, it can be incredibly helpful to review our guide on the role of the executor or administrator to fully understand the scope of your legal authority and limitations.

How States Calculate Executor Fees: Percentages vs. Reasonable Compensation

If the will does not specify how you should be paid, state law takes over. Across the United States, states generally fall into one of two categories for calculating an executor commission: statutory percentage-based fee schedules or the "reasonable compensation" standard.

The Statutory Percentage Method (Example: Ohio)

Many states rely on a fixed mathematical formula based on the total value of the estate's probate assets. This tiered schedule is designed to remove the guesswork and prevent arguments between the executor and the beneficiaries over what constitutes a "fair" hourly rate.

Ohio serves as a prime example of a state that uses a statutory percentage-based fee schedule. According to the Ohio Revised Code (Section 2113.35), an executor's compensation is calculated as follows:

• 4% for the first $100,000 of the estate's value.
• 3% for the next $300,000.
• 2% for any amounts above $400,000.

Let's run a practical scenario. Imagine you are the executor of your mother's $600,000 estate in Ohio. Your fee would be calculated like this:

• 4% of $100,000 = $4,000
• 3% of $300,000 = $9,000
• 2% of the remaining $200,000 = $4,000
• Total Executor Fee: $17,000

The advantage of the percentage method is its predictability. You don't have to argue with a judge about how many hours you worked. The disadvantage is that it ignores the actual labor involved. An estate consisting of a single $600,000 bank account is incredibly easy to settle, yet yields a $17,000 fee. Conversely, an estate worth only $80,000 but consisting of a hoarder house, a failing small business, and massive debt would only yield a $3,200 fee despite requiring ten times the work.

The Reasonable Compensation Standard (Example: Minnesota)

In contrast to the rigid percentage tables, many states—including Minnesota, Massachusetts, and others that have adopted the Uniform Probate Code—use the "reasonable compensation" standard.

Under Sec. 524.3-719 of the Minnesota Statutes, an executor is entitled to "reasonable compensation for services." But what does "reasonable" actually mean in the eyes of a probate judge? Courts in these states determine fairness by looking at several key factors:

• The time and labor required by the executor.
• The complexity and difficulty of the estate's problems.
• The specific skills and background of the executor (e.g., an executor who is a CPA might command a higher rate for performing complex tax accounting than a layperson).
• The extent of the responsibilities assumed and the results obtained for the beneficiaries.

In a "reasonable compensation" state, detailed record-keeping is your only shield. If you simply tell the court, "I worked really hard for a year, I think I deserve $10,000," the judge and the beneficiaries will likely push back. You must track your hours meticulously. Keep a log showing the date, the specific task performed, and the time spent (e.g., "March 14: Spent 3.5 hours sorting through decedent's home office to locate life insurance policies and unpaid utility bills").

This is where a tool like EverSettled becomes invaluable, allowing you to seamlessly log your administrative tasks and track your time so that your request for compensation is backed by undeniable data.

Which Estate Assets Actually Count Toward the Fee?

A critical mistake that many first-time executors make is assuming they get a percentage of the decedent's entire net worth. This is not how probate works. Executor fees are generally calculated based only on the probate estate, not the non-probate estate.

What is the difference? Probate assets are those that belonged solely to the deceased person and do not have a designated beneficiary, meaning they require the court's intervention to legally transfer ownership. Non-probate assets bypass the court entirely and transfer directly to a named beneficiary by operation of law.

Assets that typically do not count toward the executor fee calculation include:

• Life insurance payouts with a named beneficiary.
• Retirement accounts (401k, IRA) with a named beneficiary.
• Bank accounts with a Payable-On-Death (POD) or Transfer-On-Death (TOD) designation.
• Property held in Joint Tenancy with Right of Survivorship.
• Assets held inside a Living Trust.

For example, if your father dies with $500,000 in a POD bank account passing to your sister, and only a $20,000 car in his own name without a beneficiary, the probate estate is only $20,000. In a percentage-based state, your fee is calculated based on that $20,000, not the $520,000 total net worth.

Warning: If you calculate your fee based on non-probate property and pay yourself from the estate's cash reserves, the beneficiaries can (and likely will) sue you for breach of fiduciary duty. To ensure you understand everything you are responsible for managing, carefully review our comprehensive executor's checklist.

The Big Tax Trap: Why Family Members Often Waive Their Fees

If you are a family member who is inheriting a significant portion of the estate, taking an executor fee might actually cost you money in the long run. This counterintuitive reality is due to how the Internal Revenue Service (IRS) treats different types of money.

Here is the absolute most critical distinction to understand regarding executor compensation:

Inheritances are generally not subject to federal income tax, but compensation for your services as an executor is considered earned, taxable income.

According to official guidance from the IRS, executor and administrator fees are treated as taxable income by the federal government. The IRS requires executors to report this compensation on their personal income tax returns (usually on Schedule C or as "Other Income" on Form 1040, depending on your profession). Furthermore, depending on your state, you may also owe state income taxes on that fee.

Scenario: The Sole Beneficiary Tax Trap

Let's look at an extreme example to illustrate the trap. You are an only child, and you are the sole beneficiary of your mother's $500,000 estate. You are also the executor.

If you choose to waive your executor fee, you simply inherit the entire $500,000 estate. Because inheritances are generally free of federal income tax, that $500,000 goes into your bank account tax-free.

Now, suppose you decide to officially charge the estate a $20,000 executor fee to compensate yourself for the hard work. Here is what happens:

1. The estate pays you $20,000 in compensation.
2. The remaining estate drops to $480,000, which you then inherit tax-free.
3. You must report that $20,000 fee as earned income to the IRS. If you are in the 24% federal tax bracket, you will owe $4,800 in federal taxes on that fee (plus potential state taxes).

By taking the fee, you essentially converted $20,000 of tax-free inheritance money into taxable income, unnecessarily handing thousands of dollars to the government.

Even if you are splitting the estate with siblings, taking a fee can create friction. Let's say you and your brother are splitting a $100,000 estate. If you take a $5,000 fee, your brother's inheritance drops from $50,000 to $47,500. He might feel slighted, and you still have to pay income tax on the $5,000. Many family fiduciaries choose to waive their fees entirely to keep the peace and keep the inheritance tax-free. However, before you do, you must fully understand the legal liability you are taking on.

Reimbursement for Out-of-Pocket Costs vs. Compensation

It is incredibly common for families to confuse getting paid for their time (compensation) with getting paid back for their expenses (reimbursement). They are entirely different concepts legally and from a tax perspective.

When you are acting as an executor, you should never have to pay for legitimate estate expenses out of your own pocket. However, in the chaotic first few weeks after a death—before the probate court officially grants you access to the deceased's bank accounts—you might have to use your personal credit card to keep things moving. Common out-of-pocket expenses include:

• Paying for the funeral and burial arrangements.
• Ordering official copies of the death certificate.
• Paying the deceased's mortgage or utility bills to prevent foreclosure or power shutoffs.
• Hiring a cleaning service to prepare the house for an estate sale.
• Court filing fees and postage.

You are absolutely entitled to 100% reimbursement from the estate for these expenses once the estate accounts are opened. Reimbursements are not taxable income. They are simply the estate paying you back for a loan you temporarily made to it.

To ensure you are properly reimbursed without facing pushback from the court or the IRS, you must keep pristine records. Never mix your reimbursement receipts with your log of hours worked for compensation. Treat reimbursements as an estate debt. If you are curious about how other estate expenses are handled, check out our guide on probate attorney fees explained.

Hiring Professionals: Do Their Fees Come Out of Your Pocket?

Many executors quickly realize they are in over their heads and choose to hire a probate attorney or a Certified Public Accountant (CPA) to help manage the estate. The good news is that you are allowed to hire professionals, and the estate pays their fees, not you personally.

However, there is a massive catch regarding how those professional fees interact with your own executor compensation.

The estate is supposed to pay professionals for specialized professional work—such as a lawyer drafting legal court petitions or a CPA filing the estate's final tax returns. But if you hire a professional to do basic administrative executor legwork, the court may deduct the cost of that professional from your own executor fee.

The guidelines provided by the Fairfax Commissioner of Accounts in Virginia serve as a perfect illustration of this rule. The Fairfax fiduciary compensation schedule clearly states that if an executor hires an attorney or accountant to perform standard administrative duties (like cleaning out a house, organizing mail, cataloging personal property, or standing in line at the bank), those professional fees may be deducted directly from the executor's compensation.

The logic is simple: the executor fee exists to pay you for doing the administrative work. If you abdicate your job and pay a lawyer $350 an hour to organize the deceased's mail, you are forcing the estate to overpay for simple labor. The court will protect the beneficiaries by ensuring the estate only pays once for administrative tasks. This clearly distinguishes between necessary legal advice (which the estate pays for) and delegating basic executor legwork (which comes out of your pocket).

Dealing with Beneficiary Pushback and Court Approval

Taking money from an estate is a highly regulated action. As an executor, you owe a fiduciary duty to the beneficiaries. This is the highest standard of care in the legal system, meaning you must put the estate's financial interests above your own. Because taking a fee naturally reduces the amount of money the beneficiaries inherit, the process of paying yourself is strictly monitored.

In many states, an executor is not permitted to pay themselves from the estate without obtaining a prior court order. You cannot simply write yourself a check from the estate account on day one. Typically, you must wait until the end of the probate process, submit a final accounting to the court detailing every penny that came in and went out, and formally request your fee.

At this stage, the beneficiaries have the legal right to review your accounting and file an objection with the court if they believe your fee is unreasonable. If you are dealing with a sibling who won't communicate or a highly suspicious relative, you can almost guarantee they will scrutinize your compensation request.

If an estranged sibling challenges the number of hours you worked, a judge will demand to see your evidence. If your response is, "I don't have a log, I just know I worked a lot," the judge may slash your fee drastically or deny it entirely.

Note on Exceptions: Some states are more relaxed. For example, Michigan law (MCL - Section 700.3719) allows a personal representative to pay their own compensation periodically as it is earned without prior court approval, though beneficiaries still have the right to challenge it later. Always consult with a local probate attorney before writing a check to yourself.

How to Legally Decline or Renounce Your Executor Fee

After weighing the tax implications, the potential for family drama, and the hassle of court approval, a vast number of family executors decide that taking a fee simply isn't worth it.

If you decide you do not want to be paid, you must legally document this decision. It is vital to differentiate between renouncing the executor role entirely (stepping down so someone else can do the job) and simply waiving the fee while continuing to do the work. If you wish to step away from the responsibility completely, you should read our guide on renouncing the executor role.

If you plan to do the work but decline the pay, you must execute a formal fee waiver. According to the guidelines set by states like Michigan and recommended by the American Bar Association, if an executor wants to decline their compensation, they must file a formal written renunciation of the fee with the probate court and serve a copy to all interested persons (the beneficiaries).

Why go through the trouble of formally waiving it? Why not just quietly refuse to write yourself a check?

Because of the IRS. Under a legal doctrine known as "constructive receipt," the IRS can sometimes argue that if you were legally entitled to a fee and simply ignored it, you effectively earned the money and then gifted it to the beneficiaries—which could trigger unnecessary tax complications. By signing a formal waiver early in the probate process, you create a clear paper trail proving you permanently disclaimed the right to the income. It simplifies the estate accounting and prevents the IRS from questioning your tax returns later.

Staying Organized to Protect Your Estate and Compensation

Settling an estate is not something you can manage on a scratchpad or through a chaotic chain of emails. Regardless of whether you intend to claim a full executor fee based on the state's percentage, request reasonable hourly compensation, or waive the fee entirely in favor of a tax-free inheritance, detailed task tracking is your strongest shield against personal liability and beneficiary lawsuits.

If a judge or a skeptical beneficiary ever questions your actions or demands to see an accounting of the estate's administration, having your data instantly available is the difference between a swift court approval and a drawn-out legal nightmare.

This is precisely where EverSettled steps in. Our platform is designed to help executors and family members build a comprehensive, indisputable record of their work. You can use EverSettled to meticulously log your administrative tasks, track your out-of-pocket expenses for clean reimbursements, organize estate debts, and manage asset discovery all in one secure place. By keeping your estate timeline cleanly separated and deeply organized, you protect your rights to compensation and ensure you fulfill your fiduciary duty to the letter.

Frequently Asked Questions (FAQ)

Does an executor have to take a fee?

No. Taking a fee is entirely optional. Many people who serve as executors for close family members choose to waive their compensation, either to avoid federal income tax on the fee or to ensure that the maximum amount of money is passed directly to the heirs as a tax-free inheritance.

How do co-executors split the fee?

If the will names two or more people to serve as co-executors, they generally must share the statutory fee. For example, if the state's percentage formula dictates a total fee of $10,000, the co-executors do not each get $10,000. They get $10,000 total to split. Typically, this is split 50/50, but if one co-executor did 90% of the actual labor, they can petition the court (or agree among themselves) to split the fee proportionally based on the work performed.

Can I take my fee before probate ends?

In most states, you cannot. You generally must wait until the estate administration is complete and the final accounting is approved by the probate judge before you can safely distribute your fee. Some states (like Michigan) do allow periodic payments as the fee is earned, but doing so without legal advice is risky, as beneficiaries could demand the money back if the estate runs out of funds to pay its final debts.

Is the executor fee subject to payroll taxes?

Generally, no. For most family members settling a single estate, the fee is reported as "Other Income" on Form 1040, and while it is subject to federal and state income tax, it is not usually subject to self-employment tax (Social Security and Medicare). However, if you are a professional executor (like a lawyer or CPA) who is in the regular trade or business of settling estates, the fee is subject to self-employment tax. Always consult a tax professional for your specific situation.

What if the deceased promised me a certain amount verbally?

Verbal promises mean very little in probate court. If the deceased verbally told you, "I'll make sure you get $50,000 for handling my estate," but their will does not state that, the court will ignore the verbal promise. The court will only authorize a fee based on what is written in the legally binding will or, if the will is silent, the default state statutes.

Sources and Further Reading

• Internal Revenue Service (IRS): Are the fees I receive as an executor or administrator of an estate taxable?
• Ohio General Assembly: Section 2113.35 - Ohio Revised Code (Details on percentage-based fee schedules).
• Minnesota Legislature: Sec. 524.3-719 MN Statutes (Details on the "reasonable compensation" standard).
• Michigan Legislature: MCL - Section 700.3719 (Laws regarding written contracts and renouncing compensation).
• American Bar Association: Guidelines for Individual Executors & Trustees
• Fairfax Commissioner of Accounts (Virginia): Fiduciary Compensation Schedule

Disclaimer: EverSettled provides administrative software and educational resources to assist families during the probate process. EverSettled is not a law firm, and the information provided in this article does not constitute legal or tax advice. Executor compensation laws vary drastically by state, and the tax implications are highly complex. We strongly advise you to consult with a certified public accountant (CPA), a tax attorney, or your local probate court before taking or waiving any estate administration fees.

A Note About EverSettled and Legal Advice

EverSettled helps families with administrative estate settlement tasks, including document organization, task tracking, asset discovery, subscription cancellation, and estate records. EverSettled is not a law firm and does not provide legal advice. Probate rules, court forms, deadlines, fiduciary duties, and tax requirements can vary by state and by the facts of the estate, so families should speak with a qualified probate attorney or tax professional when they need legal or tax advice.