A common issue to be resolved in any administration of a decedent estate is the determination of the rightful value of the compensation due to the serving personal representation. While the will of the decedent may validly dictate the amount of compensation due to the serving personal representative (though, subject to judicial scrutiny), more commonly, the value of such fiduciary compensation follows statutory strictures. Lacking an appropriate testamentary personal representative compensation provision, states employ an array of calculation methods to determine the proper value of such remuneration based on one of several methods.
A common methodology employed in personal representative compensation statutes is to examine a suite of elements characterizing the relative complexity of the estate administration, the objectively reasonable efforts require to perform the necessary tasks, the diligence of the personal representative, and results attained therefrom:
- In determining the reasonableness of any … compensation as provided in subsection (a) of this section, the Court shall consider the following factors (as shown in the verified statements of the personal representative or of any other recipient of such compensation), as well as any other factors deemed relevant by the Court:
- The reasonable relationship of the compensation to the nature of the work performed;
- Any estimate of such compensation provided to the personal representative (or to the interested persons, in the case of compensation to the personal representative who is also counsel for the estate);
- The reasonableness of the time spent, including the number of hours spent and the usual hourly compensation for the work performed;
- The nature and complexity of the matters involved and difficulties encountered, and the results achieved; and
- Whether or not all relevant time limitations have been met (or the reasons for any delay).
In contrast, other states, including California, determine the proper personal representative fee based on the value of the administered assets to determine the rightful compensation of the personal representative via decreasing scaled percentages of the total administered asset value, that is:
4% on first $100,000 3% on next $100,000 2% on next $800,000 1% on next $9,000,000
½ of 1% on next $15,000,000
Amount requested from the court for estates above $25,000,000
Cal. Rules of Court, Rule 7.705. A variation on the asset-value fee calculation analysis is to calculate the fee using a simple flat rate percentage on the entire estate value. In re Estate of Harrison, 2000 PA Super 19, 745 A.2d 676,683 (executor’s commission of a flat rate of 5% of the value of the estate was not excessive, where the probate period was for an extended length and the administration of the estate was complex).
Finally, courts in a few states follow a hybrid approach, allowing such fee to be calculated on either a percentage of asset-based or a reasonably hourly rate basis:
Sec. 19.09 Fee Guidelines.
When fixing the fee of personal representatives and attorneys, the Court will consider the value of the decedents gross estate, including real estate and personal property passing outside the estate but subject to the filing of estate and/or inheritance tax return(s), and will use the following guidelines in determining the appropriate fees for the personal representatives and attorneys:
VALUE OR GROSS ESTATE-FEES
First $100,000.00: 3% to 5%
Next $900,000.00: 2% to 4%
Over $1,000,000.00: 1% to 3%
These guidelines reflect what may be considered to be reasonable fees, but are not binding on the Court, the parties, or the attorneys. The Court may also award fees based on an hourly rate rather than setting the fees as a percentage of the gross estate.
Tenn. 13th District Chancery Court, Rule 19.
Thus, while some states allow percentage-based commissions based on the value of the estate assets in fact administered by the personal representative, and other jurisdictions look at the hours reasonably and necessarily expended by the personal representative in administering the estate, as well as the fair hourly rate in the region for equivalent work, taking into the account the relative complexity of the estate in question, whether litigation was involved, and similar factors, still other states allow either approach to be employed in the fee calculus.
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