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Court of Wills, Estates & Probate

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

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Waiving Personal Representatives' Fees

10:30 AM
Merri Rudd

Q: After reading your columns about personal representatives, I noted with interest that you exclusively used the term "Personal Representative" and not "Executor." I thought the two terms could be used interchangeably? Also, it has been my intention that whoever shepherded my will through probate should donate his services pro bono through a sense of dedication. Aside from legitimate expenses in settling my estate, I feel quite strongly that a minimum dilution of the estate proceeds should be siphoned off as fee remuneration. How might I alter my will to achieve the results I seek? M.W., Rio Rancho

First, the easy part. New Mexico's law says "personal representative" includes an "executor, administrator, successor personal representative, special administrator and persons who perform substantially the same function under the law governing their status." No matter what other states call a personal representative, this broad definition should cover it if you move here. You are correct; the two terms are synonymous, but in New Mexico "personal representative" is the official term.

Now about your wish to have your personal representative serve pro bono, the law addresses this as well. Prior columns have established that a personal representative is, by law, entitled to reasonable compensation for his or her services. This same law also states that "if a will provides for compensation of the personal representative, and there is no contract with the decedent regarding compensation," the personal representative may renounce the provision and still be entitled to reasonable compensation. I think this means that if your will said, "My Personal Representative shall receive no compensation for serving," your personal representative could ignore this wish ("renounce the provision") and be entitled to reasonable compensation anyway.

On the other hand, the law additionally states, "A personal representative also may renounce his right to all or any part of the compensation." They may choose to do this after learning that personal representative fees are considered income by the Internal Revenue Service (unlike inheritances) 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, personal representatives, especially when they will inherit from the estate, may choose to waive their fee.

Bottom line: serving as personal representative can be a time-consuming job. Talk to your potential personal representative ahead of time and determine if he is willing to serve without compensation. If he agrees, create a signed and dated contract stating the terms of your agreement and include similar provisions in your will. Without a contract, whether the personal representative chooses to renounce the fee would be up to him, not you.

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

Appeared July 11, 2002, Albuquerque Journal, Business Outlook
Reprinted with permission

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