Fiduciary fees for an estate are calculated in one of three ways, and which one applies depends on the state where the estate is being probated. Some states set the fee by statute as a sliding-scale percentage of the estate’s value. Most states use a “reasonable compensation” standard that the probate court reviews. In either system, an hourly rate backed by time records often supports or supplements the request. The money comes straight out of estate assets, so every dollar paid to the executor or administrator is a dollar the beneficiaries don’t receive.
The Three Methods for Setting the Fee
The person settling the estate goes by different names depending on how they were appointed. A will names an executor. When there’s no will, the probate court appoints an administrator or personal representative. The job is the same either way: gather assets, pay debts, file tax returns, and distribute what’s left. State law gives that person the right to be paid, and state law also controls how the payment is figured.
Statutory Percentage Schedules
A minority of states set fiduciary compensation by statute using a sliding scale tied to the value of the estate. These schedules typically start at 4% or 5% on the first $100,000 and step down as the estate grows, dropping to 2% or lower on amounts above $1 million. The percentage applies only to assets that pass through probate, which usually excludes jointly held property and accounts with named beneficiaries.
One detail catches families off guard: the percentage is applied to the gross value of probate assets, not the net after debts. An estate with a $600,000 home and a $400,000 mortgage generates a fee based on $600,000, not $200,000. On heavily leveraged estates, that can make the fee look large next to what beneficiaries actually receive.
The upside of a statutory schedule is predictability. Everyone knows the number upfront, which reduces disputes. The statutory amount is intended to cover all ordinary administrative work; anything beyond that has to be approved separately.
Reasonable Compensation
Most states don’t use a fixed schedule. They require the fee to be “reasonable under the circumstances,” and the probate court decides what that means based on a set of factors:
- The size and complexity of the estate
- The time the fiduciary actually spent
- The skill required to handle the assets
- The results achieved for beneficiaries
- What fiduciaries in the area customarily charge for comparable work
This standard gives courts room to fit the fee to the job. It also puts the burden on the fiduciary to build a case. Detailed time records, task descriptions, and evidence of customary local rates all strengthen the request. A fiduciary who resolves a difficult tax dispute and saves the estate substantial money has a strong argument for a generous fee. One who lets a straightforward administration drift on for years does not.
Hourly Rates
Even in states that primarily use the reasonable compensation standard, fiduciaries commonly track hours and apply a defensible hourly rate to support what they’re asking for. Hourly documentation matters most on estates that are complicated but low in total value. A percentage-based fee on a $200,000 estate with a contested will, active business interests, and pending litigation may not come close to covering the actual work.
The rate has to be justifiable. Courts compare it to what professionals with similar skills charge locally. A family member without specialized training won’t command the same hourly rate as an attorney or CPA serving as executor. And if the fiduciary hires professionals to do work that falls within the fiduciary’s own duties, the court may reduce the fiduciary’s fee by whatever the professionals were paid. The estate shouldn’t pay twice for the same task.
What the Standard Fee Covers
Whether set by statute or approved as reasonable compensation, the standard fee covers the routine tasks required to settle the estate: obtaining letters testamentary, inventorying and appraising assets, managing cash flow, paying valid debts and final expenses, filing routine court documents, keeping beneficiaries informed, preparing the final accounting, and distributing what’s left.
Extraordinary Services Are Paid Separately
Work that goes beyond routine administration qualifies as extraordinary and warrants separate compensation. The most common example is litigation on behalf of the estate. Others include running a closely held business during administration, handling complex real estate transactions, or dealing with contested creditor claims. The fiduciary petitions the court for these fees, showing what was done, why it was necessary, and how long it took. Courts almost always calculate extraordinary fees hourly, even in states that use a statutory percentage for ordinary work.
Expenses Are Reimbursed on Top of the Fee
Compensation is separate from expense reimbursement. Out-of-pocket costs the fiduciary pays personally, such as travel to manage out-of-state property, filing fees, or postage, are repaid by the estate in addition to the fee. Reimbursements aren’t income to the fiduciary. Keep receipts for everything, because the court and beneficiaries review these during the final accounting as closely as they review the fee.
When the Will Sets the Fee
A will can specify a flat dollar amount, a percentage, or direct that the executor serve without compensation, and that provision generally controls. In many states, though, the fiduciary can decline what the will provides and instead take whatever the statute allows. That option matters when the will sets a fee that’s unreasonably low for the work involved.
Corporate Fiduciary Fee Schedules
Banks and trust companies publish their own schedules, structured like statutory sliding scales but usually at higher rates. A typical corporate fiduciary might charge 5% on the first $300,000, 3% to 4% on the next several hundred thousand, and 2% on amounts above $1 million, plus a percentage of the gross income the estate earns during administration. Most impose minimum fees, often $5,000 or more, which can consume a real share of a modest estate.
What you’re paying for is expertise and continuity. Bank trust departments handle estates routinely, keep in-house legal and tax staff, and don’t get sick. The trade-off is cost, and a corporate fiduciary won’t have the personal knowledge of the family that a relative would.
How Fees Divide Among Co-Executors
Appointing extra executors doesn’t automatically increase the total fee the estate pays. In most states, the commission a single executor would receive is split among the co-executors based on the work each one actually performed. Some states carve out an exception for larger estates: above a certain value, each co-executor may be entitled to a full commission, up to a statutory cap on how many full commissions the estate has to pay. Beyond that cap, the maximum allowed commissions are divided among everyone serving. Co-executors can also agree in writing to divide the fees differently. If you’re named alongside someone else, check your state’s rules before assuming the estate will pay each of you a full fee.
Court Approval and Objections
The fee isn’t final until the probate court approves it. Approval usually happens near the end of the administration, when the fiduciary files a final accounting listing every asset collected, every expense paid, and every transaction during administration. The fee request goes with it.
Beneficiaries receive formal notice and have the right to object if they think the fee is excessive or the work was poor. An objection triggers a hearing where the fiduciary defends the fee with evidence. This is where time logs, receipts, and records of results earned decide whether the fee is approved in full or cut.
Courts reduce fees for predictable reasons: the amount is disproportionate to the work, the fiduciary kept poor records, or the administration dragged on. Self-dealing is treated harshly. An executor who buys estate property for themselves below market or steers business to a company they own can lose some or all of the fee, and in serious cases the court can order a surcharge requiring the fiduciary to repay the estate personally for losses their mismanagement caused.
Tax Treatment
Fiduciary fees have tax consequences on both sides, and the choices made during administration can save or cost real money.
Where the Estate Deducts the Fee
The estate can deduct fiduciary compensation as an administration expense, but federal law makes you pick where. The fee can reduce taxable income on the estate’s income tax return (Form 1041), or it can reduce the taxable estate on the federal estate tax return (Form 706), but not both.1Office of the Law Revision Counsel. 26 U.S. Code 642 – Special Rules for Credits and Deductions To claim it on Form 1041, the fiduciary must file a statement waiving the right to ever claim it on Form 706.2Office of the Law Revision Counsel. 26 U.S. Code 2053 – Expenses, Indebtedness, and Taxes
For 2026, the federal estate tax exemption is $15,000,000 per individual, so estates below that threshold owe no federal estate tax at all.3Internal Revenue Service. What’s New – Estate and Gift Tax A Form 706 deduction is worth nothing when no estate tax is owed, so most estates should take the deduction on Form 1041. Only estates large enough to owe estate tax need to compare the two.
Income Tax on the Fiduciary
Every dollar of fiduciary compensation is taxable ordinary income to the recipient. The estate reports the payment, typically on Form 1099-NEC when the fiduciary isn’t an employee of the estate, and the fiduciary reports it on their personal return. A family member serving once generally doesn’t owe self-employment tax on the fee, because a single appointment isn’t a trade or business. Professional fiduciaries who serve regularly face a different analysis and may owe self-employment tax on what they collect.
Waiving the Fee
Beneficiaries who also serve as executor sometimes waive the fee. If you’re inheriting from the estate anyway, taking a fee converts what would be a tax-free inheritance into taxable income. Waiving keeps that money in the estate, where it flows to you as an inheritance.
The math only favors waiving when your personal tax rate is higher than the estate’s. If the estate is in a higher bracket, taking the fee and letting the estate deduct it produces a better combined result. Timing matters too. The IRS expects the waiver to happen promptly after appointment. A fiduciary who works for years and then “waives” the fee at the end risks having the IRS treat the compensation as constructively received, meaning income tax on money never taken, plus gift tax exposure when it effectively goes back to the estate. If you plan to waive, put it in writing early.