Reasonable Compensation of Executors

Serving as an executor is not an honor, it is work. As such, the person serving in this position will often want to be compensated for his, her, or its time. A common question is: how much is appropriate?

The Tennessee Code simply provides that an executor is entitled to “reasonable compensation.” To wit:

The clerk shall charge every accounting party with all sums of money the accounting party has received, or might have received by using due and reasonable diligence, and shall credit the accounting party with a reasonable compensation for services, and with disbursements supported by lawful vouchers.

Elsewhere, in the statute dealing with priority of estate claims, it says as follows:

(a) All claims or demands against the estate of any deceased person shall be divided into the following classifications, which shall have priority in the order shown:

(1) First: Costs of administration, including, but not limited to, premiums on the fiduciary bonds and reasonable compensation to the personal representative and the personal representative’s counsel;

(2) Second: Reasonable funeral expenses;

(3) Third: Taxes and assessments imposed by the federal or any state government or subdivision of the federal or any state government, including claims by the bureau of TennCare pursuant to § 71-5-116 and including city and county governments; and

(4) Fourth: All other demands that may be filed as aforementioned within four (4) months after the date of notice to creditors.

The factors for determining the reasonable compensation of the “personal representative’s counsel” are discussed in the previous post. But what does “reasonable compensation” mean in the context of the personal representative/executor/administrator?

Unfortunately, the Tennessee Code is silent on this subject. Thus, we must look to case law for the answer. In In re Estate of Schorn, 2015 WL 1778292 (Tenn. Ct. App.), the Tennessee Court of Appeals summarized the rule as follows:

Generally, personal representatives are entitled to reasonable compensation for their services and to payment for reasonable expenses incurred in good faith for the necessary benefit of the estate.  The determination of reasonableness is left, in the first instance, to the discretion of the trial court, which is to make that determination in light of all the relevant circumstances. Reasonable compensation should be fixed with reference to the entire estate and services. Among the circumstances relevant to the reasonableness of fees and expenses to be charged against an estate are the extent of the personal responsibilities rendered, the promptness and adequacy of the services, and the value of the benefits conferred. 

Because neither statutory law or case law provide hard and fast rules regarding executor compensation, the probate courts in some counties have adopted local rules that attempt to address the issue. See, e.g., Rule 17.12 of the Local Rules of Civil Practice for the Eleventh Judicial District (Hamilton County), Tennessee (pdf). However, rules that require fees to be determined based on fixed criterion, such as a percentage of the estate, are “antithetical” to the requirement that fees be determined on a case-by-case basis taking into consideration all the relevant circumstances. Thus, the local rules are not dispositive, but serve merely as guidelines. See In re Estate of Young, 2016 WL 369587 (Tenn. Ct. App.).

Statutory Sources: T.C.A. §§ 30-2-606 and 30-2-317

Posted by Joel D. Roettger, JD, LLM, EPLS

 

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