Chart of Executor's Fees --> Click Here for PDF document
Please read this article for a full explanation of the chart.
Also see Disclaimer below.
When someone dies, his or her probate estate is administered by an Executor or an Administrator. An Executor is designated under a will. An Administrator is appointed by the Register of Wills and may be appointed for a number of reasons. It may be because there is no will because the person designated in the will has died because the person designated in the will is unwilling or unable to serve as Executor or because the person designated in the will or previously appointed is no longer willing and able to serve. The term "Personal Representative" refers both to an Executor and an Administrator.
The laws in Pennsylvania that relate to Executors and Administrators can be found in the Probate, Estates and Fiduciaries Code, often referred to as the "PEF Code." The PEF Code states that the compensation for a Personal Representative shall be "reasonable and just" under the circumstances. It also states that it may be calculated on a graduated percentage and the customary manner in which those fees are determined. The compensation is the same whether a person is an Executor or an Administrator.
The PEF Code does not provide for a specific compensation for an Executor, and there is no "official" schedule of permissible fees. There is an unofficial schedule generally considered to represent "reasonable compensation" in ordinary circumstances. The schedule was included in an opinion of an Orphans' Court judge in Chester County, Pennsylvania. Probate lawyers in Pennsylvania generally assume that if the Executor's compensation in an estate is not greater than the compensation calculated on the basis of this informal schedule, then the compensation probably will be approved by the appropriate authorities.
Executor's fees are allowed as deductions on a Pennsylvania Inheritance Tax Return and on a Federal Estate Tax Return. Excessive compensation might be challenged by the taxing authorities. Executor's fees that fall within the guidelines of the informal schedule will probably not be challenged by the taxing authorities in reviewing those tax returns. Executor's fees may be reviewed by the Pennsylvania Office of the Attorney General where a will contains a charitable gift, if the Executor's fees affect the size of that gift. Again, if the Executor's fees fall within the guidelines of the informal schedule, they probably will not be challenged by the Attorney General. Executor's fees might also be challenged as excessive by a beneficiary of the estate. The Orphan's Court will probably not consider them to be excessive if they fall within the informal schedule guidelines. However, because it is not an official schedule, there is no absolute guarantee in any particular estate, that the fees will be approved even if within the guidelines of the schedule.
The informal schedule provides for graduated rates, depending on the size of the probate estate. The rates range from a high of five percent for an estate of $100,000 or less to a low of one-half percent for an estate over $4,000,000. These are marginal rates (like Federal Income Tax rates). On an estate over $100,000, the next dollar - not every dollar - is charged at the marginal rate. A portion of the estate will be charged at one or more of the higher rates. The schedule is generally based on the size of the probate estate. There may be items that pass to beneficiaries outside the probate estate - like life insurance - not considered in the computation of Executor's fees. However, the schedule does provide for certain non-probate items to be considered in the calculation. There are also certain types of probate assets - such as real estate - that may involve special calculations. The schedule should be consulted with the assistance of a lawyer who understands its proper use and interpretation.
An Executor or Administrator is not obliged to take a fee. There may be good reasons the fee should be declined. It must be remembered that the fee represents taxable income both for Pennsylvania Personal Income Tax purposes and for Federal Income Tax purposes. The income tax on the fee could be more than the deduction available for Inheritance and Estate Tax purposes. For example, if an Executor was the sole beneficiary of his or her mother's estate, and the estate was not large enough to be in the Federal Estate Tax bracket, the deduction would only be worth four and a half percent (the Pennsylvania Inheritance Tax rate on transfers from parent to child). If the Executor were in the lowest Federal Income Tax bracket - ten percent, he or she would have to pay a combined Federal and Pennsylvania Income Tax on the Executor's fee that was higher than the Inheritance Tax saving from being able to deduct that fee. If the Executor were in a higher Federal Income Tax bracket - 15 percent, 27 percent or more, the disadvantage would be that much greater. By declining the fee and merely allowing the funds to pass to the Executor as part of his or her transfers under the will, the Executor would end up with more money. It is important to consult with a knowledgeable tax advisor to determine if it makes sense to accept or decline the Executor's fee under any particular situation.
The following chart is based upon the unofficial schedule that appears in the Johnson Estate court opinion. It is not the actual schedule set forth in the court's opinion but has been simplified for ease of reference and use. The middle column shows the amount of the Executor's fee that would result from computations based upon the general schedule that appears in that Johnson Estate court opinion for an estate the size of the figure in the left hand column. The particular circumstances of any specific estate could change the appropriate computations. The rate shown in the right hand column is the percentage to be used for the next dollar added to the size of the estate.
Chart of Executor's Fees --> Click Here for PDF document
For related information - See the Table of Probate Fees in the Five-County Philadelphia Metropolitan Area.
Copyright 2014 Marc H. Jaffe
Disclaimer: This chart is for general information purposes only. It does not constitute legal advice.
Fromhold Jaffe Adams & Jun is not responsible for any errors on this chart. You should not rely on the information in this chart as the basis for any action, but you should consult an attorney about the specific facts of any particular estate before taking any action.
