San Diego Estate Planning Lawyer Blog
Administering a California probate estate is often a time-consuming affair. The personal representative (or executor) of your estate is responsible for gathering and maintaining all of your assets, paying any legitimate creditor claims, and ultimately ensuring all property is distributed according to the terms of your last will and testament. Depending on the size and complexity of your estate, the personal representative may end up spending up hundreds of yours settling your affairs.
How California Sets Compensation Levels
For this reason, California law recognizes the personal representative’s right to receive compensation for his or her services. The maximum allowable compensation for “ordinary services” is determined as a percentage of the total value of the estate. For estates valued at $100,000 or below, the personal representative’s compensation cannot exceed 4%. This means that, for instance, if you leave a probate estate worth $80,000, your personal representative cannot receive more than $3,200 in compensation.
The 4% calculation applies to the first $100,000 of the estate. Beyond that additional fees are calculated as follows:
- 3% on the next $100,000;
- 2% on the next $800,000;
- 1% on the next $9,000,000; and
- One-half of 1% on the next $15 million.
This covers an estate worth up to $25 million. Beyond that amount a probate judge must determine what constitutes “reasonable” compensation. A judge may also intervene if the personal representative requests compensation beyond the legal limits for “extraordinary services” rendered. Also keep in mind, these compensation rules only apply to a person’s probate estate; if you place some or all of your assets in a trust, these rules do not apply.
Deciding for Yourself
You can also specify how much compensation you want your personal representative to receive in your will. Any such provision automatically overrides the limits described above. The personal representative is bound by the compensation terms in your will unless a judge orders otherwise. Even if the personal representative obtains the consent of all of the beneficiaries named in your will, the compensation terms cannot be altered without a judge’s approval.
Avoiding Family Misunderstandings
It is common for individuals to name a family member as personal representative. You should consider how the personal representative’s potential compensation may affect the perception of other family members. Let’s say you have three children and plan to name the oldest as personal representative. Your other two children may resent learning after your death that their sibling is getting a “larger” share of your estate. This is not correct, of course, as the personal representative’s compensation is for services rendered, but other family members may not immediately appreciate that. This is why it is important to include all family members in the estate planning process so as to avoid any misunderstandings.
If you have questions about how the personal representative’s compensation works, or any other matter related to wills, you should consult an experienced San Diego estate planning attorney. Contact the Law Office of Scott C. Soady if you would like to speak with an attorney today.