topic | pay estate debts, taxes, and expenses
Step 2: pay professional administration expenses
Estate expenses must be paid before the estate administration process is closed. Expenses for an attorney, accountant, credit counselor, professional organizer such as MyPersonalAdministrator should be paid through the estate checking account. It is also customary for the executor to receive compensation.
Obtain a full and final accounting from the attorney and accountant, whom in many estate settlement cases, work closely together. Ensure that all tax obligations have been retired or are in process.
An executor is legally entitled to compensation for settling the estate, though amounts can vary widely. Compensation to the executor must be included on their personal income tax return. If the executor is also an heir, they may choose to waive this fee.
Compensation for the executor is generally determined by one of the following approaches:
- Reimbursement is provided for time and expenses. Time spent settling the estate and out-of-pocket expenses (e.g., funeral costs, travel, office supplies) should be recorded in Executor Expenses.
- A fee is paid based on a percentage value of estate assets - for example a percentage of the value of personal property not sold, income, or proceeds of real estate sold.
If a dispute regarding executor compensation arises, check with probate court before issuing payment.
The executor must keep track of the time and expenses spent settling estate affairs. Use Executor Expenses to track this information. Ensure written documentation exists to support claims such as time, gas, phone bills, and items purchased. Save all receipts!
Determining a fee that is agreed upon by all heirs, may be helpful to the settlement process. Make every effort to initiate conversation on this topic, early in the process, so as to avoid “surprises” for everyone involved.
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