Executor’s Right to a Fee
Under certain situations, an Executor may receive a fee in connection with serving as Executor of an Estate. Texas Probate Code Section 241 (“Compensation of Personal Representatives”) presently governs the compensation of executors in Texas in the absence of a testamentary provision to the contrary. The statutory fee only applies when the Testator’s Will is silent as to how compensation is to be paid. If the Will says “reasonable compensation,” Section 241(a) does not apply.
Texas Probate Code Section 241(a) contains three major exceptions to the general rule that an executor will be entitled to a percentage commission on the receipt and payout of “cash” and expressly provides that:
- No ordinary commission shall be allowed to an executor for receiving funds belonging to a testator or intestate estate which were on hand or were held for the benefit of the decedent at the time of death in a financial institution or a brokerage firm including cash or a cash equivalent held in a checking account or a savings account, certificate of deposit or money market account;
- No ordinary commission shall be allowed on the collection of proceeds of any life insurance policy;
- No commissions shall be allowed for paying out cash to the heirs or distributees of such in payment of their bequests or inheritance.
From the statutory exceptions listed above, it is clear that most cash funds that the executor will administer and distribute over the course of an administration will be excluded from the computation of the statutory commission. In addition, the independent executor must actually be appointed and render some services to an estate to be entitled to receive a commission. However, the services that are performed do not have to be directly or indirectly connected with the specific receipts of cash during the administration for the executor to receive a commission under Section 241. There is no statutory requirement that the independent executor actually “earn” its commissions on the receipts and/or payouts of cash on which the commission is based.
As a beneficiary, if you believe that the executor has taken a “fee” from the Estate, you should consult an attorney immediately to confirm whether such action was appropriate. If the “fee” was not appropriate, the executor may be liable for breach of fiduciary duty. The application of Section 241 can be tricky. While there are many instances where a fee is inappropriate, there are also many circumstances that often arise in even the most routine estate administrations that justify a fee.