A personal representative is a person or entity who serves as the executor or administrator for the estate of a decedent. Under Texas law, a person who serves as a personal representative is entitled to receive compensation for their services of managing the decedent’s estate. Tex. Est. Code § 352.002. Under the supervision of the Probate Court, the services that a personal representative are required to perform include identifying and inventorying estate assets, paying estate debt, and distributing assets. This work can be time-consuming and challenging. Thus, it makes sense that the Texas legislature codified in the Texas Estates Code provisions for ensuring that personal representatives receive a commission for their work. Such commission may be will-based or statute-based. Note that regardless of whether the fee is will or statute based, the personal representative must petition the probate court for payment and the court must approve the payment. Personal representative compensation is considered an expense of estate administration and is paid out of the estate assets.
In their wills, many testators detail how the personal representative should be compensated. Some testators are very specific and provide an exact dollar about as the fee. Others state that the fee would be a percentage of the estate under administration. Still others use the term “reasonable.” Regardless of what the will-based fee structure is, Texas probate courts must follow the will’s instructions and those instructions take precedence over the compensation framework described in the Texas Estates Code.
If the decedent’s will is silent on compensation, the Texas Estates Code states the amount to which they are entitled. Generally, compensation is based on the value of the estate, but there are provisions for a larger fee based on the specific services rendered by the personal representative.
Standard compensation. The “standard” fee is 5% of the amount the personal representative receives into the estate and pays out in cash. Tex. Est. Code § 352.002. For example, if the estate has a value of $5,000,000 (including amounts received and paid out), the personal fee of the personal would be $250,000. Note that the maximum amount of the fee based on the standard compensation cannot exceed 5% of the gross fair market value of the estate subject to administration.
Note that in calculating compensation, cash money owned by the decedent at the time of their death, as well as any cash held in a checking or savings account by the decedent are not to be taken into consideration. Tex. Est. Code § 352.002(b)(2)(A)
Alternate compensation. Texas estate law allows for a personal representative to receive compensation above the standard compensation if either of 2 conditions is present. Tex. Est. Code § 352.003. One condition is that as part of the tasks necessary to settle the decedent’s estate, the personal representative managed a factory, farm, ranch, or other business of the estate. If the decedent was the sole owner of a small business, continuing the business may be ordered the court as necessary to preserve the value of that asset until the business can be properly transferred to the new owner or until it can be property liquidated.
Continuing the decedent’s business is considered an extraordinary service that requires a significant amount of additional time and work. It is reasonable that the personal representative should be entitled to more compensation if required to take on this type of additional work.
The second reason that a personal representative may qualify for alternate compensation is if the court determines that the amount of the standard compensation is “unreasonably low” based on the services rendered by the personal representative. Just like continuing to run the decedent’s business would require a significant amount of extra work, there are other activities during the administration process or circumstances that might merit additional compensation because of the amount of work involved. For example, if there is lengthy estate litigation during administration or if there are uncooperative family members, the court might approve alternative compensation.
Denial of Compensation
Just as the court has the discretion to approve alternative or additional compensation, it also has the discretion to deny compensation. Compensation can be denied if the personal representative has not managed the estate properly or prudently or if they have been removed because their whereabouts are unknown, they are eluding service, or they are not a Texas resident and do not have a designated registered agent.
For example, In re Estate of Irving (Tex. App. 2021), the court denied the personal representative fees because she did not comply with Texas law in the way she managed the estate. She also did not file accountings or provide documents verifying the estate assets that she spent. accounting identifying the estate’s assets