Why Paying an Executor Is Fair to the Estate and the Heirs

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Does the executor of an estate deserve to be compensated for that service? Absolutely. As last week's article pointed out, serving as an executor is often a time-consuming, emotionally draining task.

Yet the issue of payment for an executor, especially one who is a family member, is a common source of conflict among heirs.

Almost every state allows for the compensation of executors, even if the will does not provide for payment. For example, South Dakota law says the compensation must be "reasonable" based on the time, effort, difficulty, and skills required. The laws limit reasonable compensation to 5% on the first $1,000 of the estate’s value, 4% on the next $4,000, and 2.5% on any value above that. So an estate of $500,000 could pay up to $12,585 in executor fees.

Estateexec.com (a company that sells estate management software) finds that average compensation is $18,000, which based on their average of 570 hours of work comes to $31.58 an hour. In addition to the executor fee, the average estate spends $12,400 on legal and accounting fees.