Estate administration is crucial to settling a deceased person’s assets, debts, and affairs. It involves the appointment of an executor or personal representative to manage and distribute the decedent’s property according to their wishes or state laws.
Executors and personal representatives are responsible for performing various duties, including filing taxes, paying debts, collecting assets, and distributing the estate to the beneficiaries. However, they must also be compensated for their time, effort, and expenses.
Let’s discuss how executors and personal representatives get paid in North Carolina.
If you need help navigating your duties as the executor of an estate, enlist the help of our Cary estate administration lawyers to guide you through.
Before delving into the compensation aspects, it is essential to understand who an executor and administrator are and what they’re responsible for with regard to an estate. An executor is appointed by a deceased person in their will to manage their estate and carry out their wishes. In contrast, an estate administrator is a court-appointed individual responsible for administering a deceased person’s estate when they die without a valid will.
Both an executor and an administrator are referred to collectively as “personal representatives” of the estate.
So what does an executor do, and are the duties the same as an administrator?
Both roles have similar duties and responsibilities, including gathering assets, paying bills, settling debts, and distributing the estate to the beneficiaries.
In North Carolina, personal representatives are entitled to reasonable compensation, but the amount of compensation may vary depending on various factors.
These factors include the complexity of the estate, the time and effort involved, and the personal representative’s experience and qualifications as an estate executor. North Carolina law states that executor compensation cannot exceed 5% of the estate’s value and must be approved by the court.
The court’s decision is based on what is fair and reasonable, and the personal representative needs to maintain detailed records of their time and expenses.
Apart from their compensation, executors and personal representatives are entitled to reimbursement for reasonable expenses incurred while performing their duties.
These expenses may include:
However, the expenses should be reasonable, necessary, and supported by proper documentation.
Personal representatives in North Carolina typically get paid after completing their duties and obtaining court approval.
The payment is usually made from the estate’s assets before the remaining assets are distributed to the beneficiaries. It can be made in installments or as a lump sum, depending on the personal representative’s preference and the court’s approval.
Personal representative compensation is taxable income. This means that it is subject to federal and state income taxes.
Representatives must report their compensation as income on their tax returns and pay the appropriate taxes. Additionally, if the estate owes any taxes, the personal representative needs to ensure that the taxes are paid from the estate’s assets before their compensation is paid.
Personal representatives in North Carolina have a big job to do. That’s why they are entitled to reasonable compensation for their services and reimbursement for reasonable expenses incurred while performing their duties.
If you’ve been named as an executor or appointed by the court, you may need some legal guidance throughout the process. Contact us at Cary Estate Planning, and we’ll walk you through your responsibilities and help settle your loved one’s estate properly.
Can an executor or personal representative waive their compensation?
Yes, an executor or personal representative can waive their compensation. However, they need to do so in writing and obtain court approval.
Can an executor or personal representative receive additional compensation?
An executor or personal representative may sometimes receive additional compensation for extraordinary services or circumstances. However, the additional compensation must be reasonable and approved by the court.
Can an executor or personal representative hire professionals to assist them in administering the estate?
Yes, an executor or personal representative may hire professionals such as estate administration attorneys, accountants, and appraisers to assist them in administering the estate.
They can often be valuable for navigating the legal waters and providing tips for executors. Know that when you work with us at Cary Estate Planning we will assist you along the way. Our goal is to provide the peace of mind that you don’t have to navigate this process alone.
What happens if an executor or personal representative is found to have acted improperly or breached their fiduciary duty?
If an executor or personal representative is found to have acted improperly or breached their fiduciary duty, they may be removed from their position, and their compensation may be forfeited. Additionally, they may be held liable for any damages or losses incurred by the estate or beneficiaries.
Paul Yokabitus is the CEO and Managing Partner of Cary Estate Planning, a Cary, NC, estate planning law firm. With years of experience in estate and elder law, he has zealously represented clients in various legal matters, including estate planning, guardianship, Medicaid planning, estate administration, and other cases.
Paul received his Juris Doctor from the Campbell University School of Law and is a North Carolina Bar Association member. He has received numerous accolades for his work, including being named among the “Best Attorney in Cary” in 2016 and 2017 by Cary News and Rising Star in 2020-2023 by Super Lawyers.