A common question of those who have been named in a loved one’s will as the executor or personal representative is whether they will get paid for the work they perform settling the estate. Generally, the answer to that question is, “yes”. While some may feel uncomfortable with getting paid for the work they do on the estate of a close family member or friend, the reality is that for many estates the job of the executor, also known as the personal representative, can be difficult and time-consuming. Thus, the Montana legislature decided that personal representatives are entitled to reasonable compensation for the work that they do.
Reasonable Compensation Defined
The amount of compensation to which a personal representative is entitled is either based on the amount stated in the decedent’s will or is based on the statutory framework. What the decedent determined to be an appropriate amount of compensation for the work of the personal representative may be very different from what the legislature determines to be reasonable. As a result, a personal representative is not required to accept the amount the decedent offered in their will. They have the right to renunciate it and opt for the statutory amount.
The statutory amount is based on the value of the estate. The larger the estate in terms of asset value, the more the personal representative would be entitled to receive as compensation. According to Mont. Code Ann. § 72-3-631, here is how reasonable compensation is determined:
- Up to 3% of the first $40,000 of the value of the estate
- Up to 2% of the value of the estate in excess of $40,000
- Minimum compensation is $100
Some estates have more than one personal representative. For example, a parent may name siblings as co-executors. Regardless of how many personal representatives, for purposes of compensation, the role is viewed as one job, and there is only one payment for the job. In other words, the amount does not increase if there is more than one personal representative. The probate court will approve the statutory amount and the personal representatives will have to divide that amount.
Note that the probate court does have discretion to award more than the statutory amount. If the personal representative believes that they deserve more based on the amount of work they performed, they would have to petition the court and request more. The court may allow additional compensation if the record shows that the personal representative performed “extraordinary services” due to the complexity of or amount of work involved. However, there is a limitation on the amount of additional compensation. It may not exceed the amount of the original amount of compensation. For example, if based on the value of the estate the executor is entitled to a fee of $10,000, if it is determined that the executor performed extraordinary services, the maximum amount of additional compensation that they could receive is $10,000.
Role of the Personal Representative
The role of the personal representative in the estate administration process is significant. The purpose of the process is to finalize the estate’s outstanding business. This means that debt and expenses must be paid, and the assets must be distributed. The personal representative’s job is to ensure that all the steps required to pay debts, pay expenses, and distribute assets are completed in a manner consistent with the decedent’s will, if any, and Montana law. Particularly if the estate is large, has complex assets, or has many beneficiaries, the process can be time-consuming and complicated.
While the law allows for compensation, a personal representative is not required to accept compensation. Even if the will provides for compensation, the personal representative can refuse it. There are many reasons that someone may choose no refuse compensation. One common reason is that for emotional reasons a close family member or friend may feel uncomfortable accepting money for caring for the final affairs of their deceased loved one. Another reason for turning down compensation is a more practical one. Executor compensation is taxable income. If the executor or personal representative is a beneficiary or heir, it may make financial sense to receive the money they would have received as a fee as part of their inheritance.