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PROBATE LAW
Section 6 - Estate Expenses And Compensation
Expenses of Administration - Personal Representative and Attorney Compensation
The expenses of administering estates vary depending on many factors, only one of which is the size of the estate. As noted above, the expenses of administration may include court fees, certification fees, surety bond premiums, the California probate referee's fees, agency fees, insurance premiums, expenses of selling assets, accountant's and the personal representative's, and attorney's compensation. The largest costs are usually the latter two.
Compensation for Ordinary Services of Personal Representative and Attorney
The personal representative, is allowed compensation for services rendered. Unless the will makes special provision for compensation, the amount of compensation for "ordinary" services is fixed by California statute and is based on the value of the estate for which the personal representative accounts. This value generally includes the inventory value of the probate estate and income received during the period of administration. Compensation for ordinary services are calculated based on the amount of the estate accounted for as follows:
4% on the first $100,000 or fraction thereof;
3% on the next $100,000 or fraction thereof;
2% on the next $800,000;
1% on the next $9,000,000;
1/2% on the next $15,000,000; and
"reasonable" compensation on the excess over $25,000,000.
The same schedule is used to determine the compensation paid to attorneys for their "ordinary" services.
Compensation for Extraordinary Services
In addition to the statutory compensation discussed above, the probate court may, in proper instances, authorize payment of additional compensation to the personal representative and/or to the estate's attorneys for "extraordinary" services rendered in the administration of the estate. There is no prescribed schedule of compensation for such services. The amount in each instance is fixed by the court on the basis of a declaration by the applicant as to the nature and extent of the extraordinary services rendered to the estate.
For example, if it were necessary to carry on the decedent's business under court order or to participate in litigation involving the estate, such services would be regarded as in addition to the ordinary services.
Similarly, attorneys and paralegal assistants are frequently called upon to perform legal services in connection with the administration of an estate that are regarded as extraordinary in nature and are not covered by the statutory compensation provided for by the Probate Code. Such services may include the following, fairly common situations: handling sales or mortgages of real or personal property; contesting or defending litigated claims against the estate; preparing federal and/or state estate, inheritance, gift, income, sales, property or other tax returns; representing the estate in an audit or litigation concerning any of those taxes; handling litigation relating to property of the estate; arranging for the conduct of ancillary administration in other states where the decedent owned property; and preparing petitions for instructions, to determine heirship, and for preliminary distribution. Our compensation for extraordinary services is based upon the size and complexity of the matter at issue, the results achieved and the benefit ultimately conferred upon the estate. We will periodically consult with the personal representative regarding the probable compensation to be incurred as matters calling for such "extraordinary" service arise. Of course, all extraordinary compensation must ultimately be approved by the court after a noticed hearing.
Agents for Personal Representatives
An individual who is not an experienced fiduciary is entitled to receive the statutory compensation for serving as a personal representative, even though he or she does not have the training or experience required to perform all of the personal representative's duties. We have found that many estates can be more efficiently administered if a nonprofessional personal representative hires others to perform some or all of the services he or she is expected to perform. The most common examples are examining records of the decedent for information as to assets or claims, establishing and maintaining estate bank accounts, receiving income and making disbursements, maintaining the accounting records, and preparing periodic accounting reports. However, a personal representative is generally not entitled to reimbursement from the estate for the expenses incurred for such services. Most courts consider such expenses to be expenses of the personal representative, which must be paid from his or her compensation.
If the personal representative wishes to engage an agent to perform ministerial functions, there are several alternatives available. Banks, private fiduciaries and some accountants serve as probate agents. Our firm is also equipped to perform such services. If the personal representative wishes us to do so, we will arrange compensation for such services that will be billed to the personal representative individually and will be separate from our compensation as attorneys for the estate. Our total compensation for the agency services will not exceed the statutory compensation to which the personal representative is entitled.
Waiver of Representative's Compensation
Compensation paid to a personal representative is taxable income to the personal representative. Under some circumstances, a personal representative who is also a beneficiary may benefit by waiving his or her right to compensation. We will discuss this option with you at an early stage in the estate administration proceedings.
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
Expenses of Administration - Personal Representative and Attorney Compensation
The expenses of administering estates vary depending on many factors, only one of which is the size of the estate. As noted above, the expenses of administration may include court fees, certification fees, surety bond premiums, the California probate referee's fees, agency fees, insurance premiums, expenses of selling assets, accountant's and the personal representative's, and attorney's compensation. The largest costs are usually the latter two.
Compensation for Ordinary Services of Personal Representative and Attorney
The personal representative, is allowed compensation for services rendered. Unless the will makes special provision for compensation, the amount of compensation for "ordinary" services is fixed by California statute and is based on the value of the estate for which the personal representative accounts. This value generally includes the inventory value of the probate estate and income received during the period of administration. Compensation for ordinary services are calculated based on the amount of the estate accounted for as follows:
4% on the first $100,000 or fraction thereof;
3% on the next $100,000 or fraction thereof;
2% on the next $800,000;
1% on the next $9,000,000;
1/2% on the next $15,000,000; and
"reasonable" compensation on the excess over $25,000,000.
The same schedule is used to determine the compensation paid to attorneys for their "ordinary" services.
Compensation for Extraordinary Services
In addition to the statutory compensation discussed above, the probate court may, in proper instances, authorize payment of additional compensation to the personal representative and/or to the estate's attorneys for "extraordinary" services rendered in the administration of the estate. There is no prescribed schedule of compensation for such services. The amount in each instance is fixed by the court on the basis of a declaration by the applicant as to the nature and extent of the extraordinary services rendered to the estate.
For example, if it were necessary to carry on the decedent's business under court order or to participate in litigation involving the estate, such services would be regarded as in addition to the ordinary services.
Similarly, attorneys and paralegal assistants are frequently called upon to perform legal services in connection with the administration of an estate that are regarded as extraordinary in nature and are not covered by the statutory compensation provided for by the Probate Code. Such services may include the following, fairly common situations: handling sales or mortgages of real or personal property; contesting or defending litigated claims against the estate; preparing federal and/or state estate, inheritance, gift, income, sales, property or other tax returns; representing the estate in an audit or litigation concerning any of those taxes; handling litigation relating to property of the estate; arranging for the conduct of ancillary administration in other states where the decedent owned property; and preparing petitions for instructions, to determine heirship, and for preliminary distribution. Our compensation for extraordinary services is based upon the size and complexity of the matter at issue, the results achieved and the benefit ultimately conferred upon the estate. We will periodically consult with the personal representative regarding the probable compensation to be incurred as matters calling for such "extraordinary" service arise. Of course, all extraordinary compensation must ultimately be approved by the court after a noticed hearing.
Agents for Personal Representatives
An individual who is not an experienced fiduciary is entitled to receive the statutory compensation for serving as a personal representative, even though he or she does not have the training or experience required to perform all of the personal representative's duties. We have found that many estates can be more efficiently administered if a nonprofessional personal representative hires others to perform some or all of the services he or she is expected to perform. The most common examples are examining records of the decedent for information as to assets or claims, establishing and maintaining estate bank accounts, receiving income and making disbursements, maintaining the accounting records, and preparing periodic accounting reports. However, a personal representative is generally not entitled to reimbursement from the estate for the expenses incurred for such services. Most courts consider such expenses to be expenses of the personal representative, which must be paid from his or her compensation.
If the personal representative wishes to engage an agent to perform ministerial functions, there are several alternatives available. Banks, private fiduciaries and some accountants serve as probate agents. Our firm is also equipped to perform such services. If the personal representative wishes us to do so, we will arrange compensation for such services that will be billed to the personal representative individually and will be separate from our compensation as attorneys for the estate. Our total compensation for the agency services will not exceed the statutory compensation to which the personal representative is entitled.
Waiver of Representative's Compensation
Compensation paid to a personal representative is taxable income to the personal representative. Under some circumstances, a personal representative who is also a beneficiary may benefit by waiving his or her right to compensation. We will discuss this option with you at an early stage in the estate administration proceedings.
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.
Copyright 2018 © by Jacqueline M. Skay. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.
Copyright 2018 © by Jacqueline M. Skay. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.
