In Pennsylvania, a personal representative, also known as an executor or administrator, is the person or persons responsible for settling the estate of someone who has passed away. Even with an estate that does not have significant assets, the work of a personal representative can involve a great deal of time and effort. Not only is the personal representative required to manage the business of the estate and distribute its assets, they must also deal with family members, familiarize themselves with Pennsylvania’s rules related to estate administration, and work with professionals such as appraisers, attorneys, and accountants. It makes sense that executors are not required to do this work for free. Under Pennsylvania law, they are entitled to receive “reasonable and just compensation” for their work. 23 Pa.C.S. § 3537
Reasonable and Just Compensation
While some states provide a detailed formula for determining the amount of the commission that the personal representative is entitled to receive, Pennsylvania does not. Instead, the law directs that the compensation is to be “reasonable and just.” To determine what is reasonable and just, the law requires a review of the circumstances. In other words, the law recognizes that each estate is unique. Thus, the circumstances of a particular estate will determine what is reasonable and just for the personal representative who handled that estate.
Having said that, the 1983 Johnson case has been used as precedent and provides a framework for determining what is reasonable and just under the circumstances of a particular case. As is done in many other states, the Johnson case provides a fee scheduled that is a based on the value of the estate. Johnson Estate, 4 Fid. Rep. 2d 6 (O.C. Chest. 1983). The schedule provides for commissions ranging from .5% to 5% of the value of the estate.
However, the Johnson fee schedule is only a guideline and courts have deviated from it. For example, in Duhovis Estate, 2 Fid. Rep. 3d 431 (O.C. Montg. 2012), the co-executors requested a commission that was 18% of the value of the gross estate. The son of the decedent who was also the beneficiary objected to the fee, arguing that under Johnson, fees are limited to 5%. The court disagreed that the fee schedule in Johnson set a maximum. It also noted that the Johnson schedule was not binding. Instead, the court looked at the work that the co-executors performed in and concluded that they were entitled to a fee of 10% of the gross estate. The decision was based on the following factors:
- The co-executors devoted “sufficient time to their fiduciary duties”
- The son refused to let an appraiser access to estate property to appraise it, causing additional work for the executors.
- There were delinquent real estate taxes that the co-executors had to spend time addressing
- There were delays in obtaining the proceeds of an annuity because the son refused to provide the necessary information to the insurance company
Duhovis shows that in determining whether a fee is reasonable and just, a court can consider the specific activities that the executor had to handle during administration. Interestingly, in Duhovis the person who objected to the proposed fee was the same person who contributed significantly to the additional work that the co-executors had to perform. The more general application of Duhovis to the determination of the reasonableness of a fee, the court will consider the amount of work required by the executor and if there were extraordinary work required. For example, litigation during the process may require more work for the executor. Additional work caused by difficulty in accessing estate property may require more work for the executor. It is up to the executor to be prepared to defend the requested fee with evidence of the time they spent and the work they completed.
Note that some testators state in their will how much the executor is to be compensated. If this is the case, the fee set forth in the will must be followed unless the executor renounces it.