In Iowa, the fee for the executor is set by the court and is based upon a state statute. Their fee is also based upon the size of the estate, as reported on the inventory filed with the probate court. Iowa Code section 633.197 provides that the personal representative (executor or administrator) fee shall not exceed $220.00 for the first $5,000 of probate assets, and then 2% on all assets over $5,000.00. All assets of the estate are included in the fee determination, with the exception of life insurance payable to others.
Any compensation received by a personal representative is taxable income to that individual. Thus, if a personal representative is a beneficiary, they may want to consider whether to waive their fee and thus increase their inheritance, which may be free of tax, or to take their compensation and pay income tax on that amount.
12 comments:
Do assets with beneficiaries need to be included in the estate for purposes of determining compensation for the Executor?
It depends on the asset, but normally, yes. If it is life insurance payable to a named beneficiary other than the estate, it is excluded. Other assets with named beneficiaries (retirement, annuities, etc.) are included in the calculation.
The amounts you mentioned for compensation ie 220.00 up to $5000
etc is that an annual fee and what if there are two trustees? Do the courts allow additional compensation for especially contentious situations.
For executors (you mention trustees), it is a one time fee. Some judges split the fee in 1/2, some may give each the full. There is a different fee structure for trustees. If there are extraordinary issues involved (litigation for example) the court can award extraordinary fees to an executor and the attorney. There are special rules to follow before extraordinary fees are granted.
My father recently passed away and had unsecured credit card debt in the amount of $2000. Should I pay that debt or accept my executor fee of 2% (which almost equals the $2000)? Then I likely pay tax on the $2000. His estate is close to being insolvent at this point after paying secured debt. Will the credit card co. just write it off if not paid?
Anonymous-
Expenses of administration have a higher priority then the general creditors, so you might as well pay yourself your fee and the taxes. If there isn't enough funds to pay any other claims, the credit card company is out of luck on payment, but you should make sure the final order addresses that matter.
What can a person do if the lawyer and the exector of the estate request more than the percentage given by law.
Is the grose or net amount of the estate subject to compensation of executor or lawyers.o
what percentage of an estate is subject to lawyers and what percentage to executors.
Several replies to M/M Anonymous:
Gross amount of estate is subject to fee calculation.
By statute, the 2% fee ceiling is the same for executors and attorneys. Often different in actual application.
If attorney/executor asks for more, the court should not grant it. HOWEVER, there can be reasons for extraordinary fees. See http://www.iowaestateplan.com/2007/08/iowa-attorney-fees-in-probate.html
Wife dies of cancer. Leaves all
retirement funds, bonds etc. to
husband. He commits suicide one
month after her death. His parents
take all her assets. Is this legal?
($1,500,000) She had parents and
siblings living.
Anonymous-
While I wouldn't say this is common, it is is a typical example that I give about how property can pass at death. Named beneficiaries inherit, without conditions or limitations. Thus, if one spouse dies, leaves all to surviving spouse, and the surviving spouse dies 10 minutes (or 10 years) later, the surviving spouse directs where those assets go. They can direct by their will/trust if they have one, otherwise the intestate laws will direct those assets. Short answer - nothing illegal about this.
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