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Court of Wills, Estates & Probate

The following articles were written by former Probate Judge Merri Rudd.

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Personal Representatives’ Fees

10:31 AM
Merri Rudd

Q: Can I be paid for serving as personal representative of an estate?

The personal representative handles the business matters of a deceased person's estate. Tasks include locating assets, initiating a court probate proceeding if necessary, distributing assets according to the instructions in the will (or according to state law, if no will exists), filing tax returns, and paying debts and creditors.

New Mexico law says that personal representatives are entitled to receive "reasonable compensation" for their services. Personal representatives are also entitled by law to receive from the estate "necessary expenses and disbursements including reasonable attorneys’ fees."

Calculating a fair fee depends on the work you are doing for the estate. For instance, if you are clearing out a garage, a fee of $10 or $15 an hour, not $50 an hour, is probably reasonable. If you are filing taxes, meeting with professionals, or preparing accountings, then a higher hourly rate might be charged.

To give some perspective, earning $20 an hour for a full-time job would yield about $40,000 a year; $50 an hour would be over $100,000. Personal representatives do not normally work full-time to settle an estate, so their fees should be much less than a full-time salary.

Fees will vary from estate to estate. Much depends on the amount of time spent, the complexity of the tasks, the degree of skill necessary, the size of the estate, and other criteria. If you are a CPA, tax attorney, or other professional with special expertise, charging your regular professional rate for certain services may be reasonable. (Banks and financial companies generally charge 1 to 1.5% of the estate assets per year as fees to manage property such as trusts, and more if special circumstances are involved.)

There are no hard and fast rules for calculating compensation. But the law allows "any interested person" to ask the court to review the reasonableness of compensation of personal representatives, as well as fees paid to professionals hired on behalf of the estate. The court may order any person who has received excessive compensation to make appropriate refunds to the estate.

Keep a detailed log of the date, time spent, and tasks accomplished by you. Such records will help you justify whatever fee you charge. Discussing your proposed fees with those who are receiving estate assets may avoid future disputes.

An important point: fees awarded to a personal representative or trustee are considered income and must be reported on state and federal income tax returns. New Mexico gross receipts tax must also be paid on these fees.

To avoid this tax liability, many personal representatives, especially when they will inherit from the estate, choose to waive their fee. If so, a written renunciation of the fee may be filed with the court.

Inheritances, on the other hand, are specifically excluded from the IRS's definition of income and do not generally trigger income tax liability. With limited exceptions, recipients do not report inheritances as income on federal or state income tax returns.

© 2002, Merri Rudd & Albuquerque Journal, All Rights Reserved

Appeared May 30, 2002, Albuquerque Journal, Business Outlook
Reprinted with permission

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