When someone passes away, the probate court appoints a personal representative, also referred to as an executor), to manage the decedent’s estate during the estate administration process. The job of the personal representative is to perform the tasks necessary to care for the outstanding business of the decedent so that their estate can be closed.
For example, the personal representative must identify, appraise, and inventory estate assets. They must notify creditors and pay all properly filed, valid claims to the extent there are assets in the estate to do so. Finally, they must distribute estate assets to beneficiaries and heirs. Because the activities that the personal representative must perform are time-consuming and challenging, Vermont law allows for compensation. The compensation must be “reasonable” and can be based on the terms of the will or the statutory amount.
Personal representative compensation is considered an expense of administration. Like any other expense of administration or debt, it is paid from estate assets. Unlike most debt, the payment of compensation to the personal representative is given top priority, along with other expenses of administration. 14 V.S.A. § 1205. In other words, assets must be put aside to pay the personal administrator before most other expenses and debt is paid and before assets are distributed.
Will-Based Personal Representative Compensation
The purpose of a last will and testament is to leave instructions for how the testator wants their estate to be managed after they pass away. Part of those instructions typically include a clause nominating the personal representative or executor as well as specifying how much that person is to be paid. The testator can leave a specific dollar amount, such as $10,000. That amount would be paid regardless of the size of the estate and how much work the personal representative actually performed.
A testator can specify a percentage of the value of the assets under administration, such as 5 or 10%. In some instances the testator is less specific and requires only that the personal representative receives reasonable compensation. Note that if the personal representative feels that the will-based compensation is inadequate or problematic for any other reason they have the right to reject. To reject it, they must file the rejection in writing with the probate court. If they reject the compensation provided by the will, they can opt for the statutory scheme or to receive no compensation.
Statute-Based Personal Representative Compensation
If the decedent did not leave a will, if their will is silent on personal representative compensation, or if the personal representative rejects the will-based compensation, then Vermont’s statutory compensation scheme would apply. The statutory scheme is vague, providing for a “reasonable fee.” 14 V.S.A. § 1065.
In determining whether the fee that a personal presentative submits for approval is reasonable, the court will look a number of factors. For example, the court will look at the size of the estate. While Vermont does not specify a sliding scale fee based on the value of estate assets, a court will look at the size of the estate. Smaller estates generally tend to be less complicated and require less work to manage than large estates. When considering what is reasonable based on the size of the estate, the court will consider personal representative fees that have been paid for similar sized estates in the same geographic area.
Another factor the court will consider is whether there was litigation during the process. Whether the probate dispute and litigation is a will contest, contested creditors claim, or some other type of dispute, they will add more time and work to process. A protracted case will give the personal representative a strong argument for a higher fee.
If the court requires the personal representative of temporarily run the decedent’s small business while arrangements are being made for it to be liquidated, sold, or transferred to is new owner, the personal representative’s fee would likely be higher than it otherwise would have been.