Author: Brenton McWilliams
What is the Compensation for Serving as an Executor or Administrator of an Estate in Alabama?
In Alabama, by statute, the maximum compensation for an executor or administrator (personal representative) of an estate in ordinary cases is two and a half percent of the value of the estate property received by the executor or administrator and two and a half percent of the value of the disbursements from the estate. Within this maximum amount, the executor or administrator is entitled to reasonable compensation for services based on a consideration of fairness including the following factors:
“A personal representative is entitled to reasonable compensation for services as may appear to the court to be fair considering such factors that may include, but are not limited to,
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the novelty and difficulty of the administrative process,
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the skill requisite to perform the service,
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the likelihood that the acceptance of the particular employment will preclude other employment,
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the fee customarily charged in the locality for similar services,
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the amount involved and the results obtained,
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the requirements imposed by the circumstances and condition of the estate,
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the nature and length of the professional relationship with the decedent,
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the experience, reputation, diligence, and ability of the person performing the services,
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the liability, financial or otherwise, of the personal representative,
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the risk and responsibility involved”
Based on considerations of fairness including the factors above, the court may set the compensation of the personal representative of the estate at the maximum or a lower amount.
In the case of Wehle v. Bradley, compensation in the amount of $1,964,367.82 was approved for the co-personal representatives of the estate. The total receipts of the estate (assets and income during administration) through the time of final settlement were $40,477,724.08; the total disbursements were $40,452,262.23. Based on Alabama’s personal representative compensation statute, the maximum compensation that could have been approved was $2,023,249.66. Several beneficiaries of the estate appealed the judgment of the trial court as to the compensation of the personal representatives. On appeal, the Alabama Supreme Court discussed the circumstances of the estate and the role of the personal representatives:
“The estate was “very large and complex.” The estate was valued at more than $35,000,000 at the time of Robert G. Wehle’s death, and the estate contained some unusual assets, including competition-trained hunting dogs, partial ownership interests in thoroughbred horses, and artwork. The estate also included other business entities owned by Robert G. Wehle, and his estate plan included multiple trusts. It is undisputed that Robert G. Wehle chose the personal representatives because of his longstanding business and personal relationships with each of them and because of each personal representative’s expertise: McGowan is a lawyer who practices law in New York; Hartzog is a certified public accountant who practices accounting in Alabama; and Bradley is an expert in dealings with thoroughbred horses and hunting dogs. Also, there was evidence indicating that Robert G. Wehle desired that the personal representatives receive “the 5% maximum” for their services.”
The standard of review for the trial court’s judgment on the issue of the personal representatives’ compensation was abuse of discretion, meaning that the appellate court would not overturn the trial court’s decision unless the trial court exceeded its discretion in awarding the amount of compensation it awarded to the personal representatives. The Alabama Supreme Court affirmed the trial court on this issue reasoning that the trial court had properly applied the factors from the statute above, that there sufficient evidence to support the personal representative’s compensation set by the trial court, and, that, it is not the role of the appellate court to reweigh evidence to substitute its judgment.
For Extraordinary Services, the Personal Representative’s Compensation May Exceed the Statutory Maximum
The court may approve compensation for the personal representative in excess of the statutory maximum where extraordinary services are performed for the estate. Beyond the maximum two and a half percent of the value of the estate property received by the executor or administrator and two and a half percent of the value of the disbursements from the estate, the court may approve additional reasonable compensation where the executor or administrator performs extraordinary services benefitting the estate. Examples of extraordinary services that have supported additional compensation for personal representatives include extraordinary effort to preserve assets of the estate, extraordinary effort to maximize the value of assets of the estate, services to locate heirs of an intestate estate with numerous unknown heirs, and also service in estates involving significant risks and responsibilities.
The Personal Representative’s Compensation May Be Set in the Last Will and Testament
A testator has the option to fix a set compensation for the personal representative in the last will and testament. The testator can set the compensation at any amount in the last will and testament including completely removing compensation for the personal representative, setting compensation at zero, or setting the personal representative’s compensation at an amount that exceeds the statutory maximum.
If you need legal representation for an estate in Alabama, please call me at (251) 215-9275 or write me on the contact page to schedule an appointment to discuss how I can help.