A personal representative is responsible for performing the activities that are required to close the estate of a deceased person. Such activities include inventorying assets, pay estate debt and expenses, and distributing estate assets. The process of estate administration begins with a petition being filed with the probate court, and the court appointing the personal representative. The role of the personal representative is also called the executor or the administrator.
While it may seem like an odd way to view it, the work of a personal representative in managing an estate of a decedent and settling their affairs is a job. As such, the person appointed or “hired” by the court to perform that job is entitled to reasonable compensation for their work. The amount of compensation is determined in one of two ways. One way is that the amount of compensation is controlled by the decedent’s will. The other way is a statutory amount. In either case, the compensation is paid from estate assets.
A testator can choose to state in their will the amount that the personal representative is to be paid. It might be a flat amount, a percentage of estate assets, or an hourly amount. The personal representative is not required to accept the compensation scheme stated in the will. They can reject it by filing a written renunciation with the court. N.D.C.C. § 30.1-18-19. If they reject the amount provided in the will, they would be entitled to reasonable compensation as described in the statute.
While the statutory compensation scheme takes precedence over the statutory amount, if the will is silent on compensation, if the personal representative rejects the statutory scheme, or if there is no will, then the personal representative will be entitled to “reasonable compensation” for their services.
Unlike other states, North Dakota does not provide a formula for figuring out the amount of compensation that would be reasonable. Some states base it on a percentage of the value of the probate assets that the personal representative manage. However, even though the statute does not require it, when determining whether a fee is reasonable, the court would factor in the amount of the estate’s assets. Other factors that the court may consider include:
- The amount of work actually performed. The administration process for some estates can be relatively straightforward, requiring the personal representative to perform the basic activities to settle the estate, while other estates require much more work. For example, if there was probate litigation that may have required the personal representative to perform a lot more work.
- The experience and skill of the personal presentative. An experienced and skilled personal representative would be entitled to a higher amount of compensation because of the competence that they bring to the tasks. Also, they may be able to perform more of the tasks without having to hire other professionals to help.
- The length of time of the process. While the estate administration process usually takes less than a year, a complicated estate can take more than a year, while a small, uncomplicated estate can take a few months.
Note that if the personal representative does a poor job, the court has the discretion to limit compensation.
Although a personal representative has the right to reasonable compensation, they are not required to accept it. A personal representative can renounce compensation by letting the probate court know in writing.
One reason for rejecting compensation is to avoid the tax consequences. For example, a spouse or child of the decedent may decline compensation because they may be beneficiaries of the decedent’s will or heirs. Thus, they would be entitled to receive estate assets, including any money that they would have received as compensation, without it being considered taxable personal income. Also, a personal representative may not feel comfortable being paid for managing the estate of a loved one.