I am the Executor of my recently deceased father's estate. A portion of the will is governed by a Trust. I am the major beneficiary of both the will and trust.
What is a reasonable percentage for the Executor's fee (an administrative expense when paying inheritance taxes), and would it be calculated on the total value of the trust combined with will assets?
Executor's fees are usually strictly controlled by statute, and are usually around 3% (more for smaller estates and less for larger ones). Some states allow you to petition the court for extra fees for extenuating circumstances. Are you sure you want to do this? The executor's fee IS INCOME to you and you will have to pay tax on it -- probably over 30% if you have another job (both Federal & PA income taxes added together). This is a lot more than the approximately 5% PA inheritance tax. Some executors will get more money taking the fee, but this seems unlikely if you are the "major" beneficiary.
Your question about the total value of the estate is probably also strictly governed by statute (with perhaps some case law covering the unclear issues). If the trust is a living trust, then the purpose of it was to avoid being in the probate estate (and in PA, probably to avoid the 5% tax -- which frequently does not work, by the way). If the trust is created by the will, then it is definitely part of the estate.
Get a lawyer to help you with this. You need a couple of hours of advice (probably less than $1,000) which could save you tax headaches for years to come. If you think that is too much money, many accountants are quite experienced with these issues and, typically, they charge about half as much as lawyers -- but they won't give you legal advice. My comments above are just a general discussion and are not intended as legal advice.
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Wills and Living Wills Lawyer
Mr. Duffy's comments are generally on point. The inaccuracies do not materially affect his correct reasoning.
However, your statement that a portion of the will is governed by a trust requires clarification. Generally, there are two types of trust: inter vivos (or living trusts) and testamentary trusts. If your father had a living type trust, generally the will has no impact on the trust. Most of his assets should have been transferred to the trust when it was established, and a "pour over" will signed that transfers any assets that did not make it into the trust during his life to the trust after he passed away. Therefore, assets transferred to the trust prior to his death are not part of the probate estate.
If he created a testamentary trust, then the situation is considerably different. Many people who are the sole or primary beneficiary mistakenly think that they do not need professional assistance because it is a waste of money and there is no one to contest what they do. They fail to understand that there are other people or entities who are interested in seeing that things are handled properly, including the IRS, PA Dept of Revenue, and creditors.
Unless you are ready to prepare all the necessary tax returns (income and fiduciary), the money for professional assistance would be well spent.
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Estate Planning Attorney
Both of the answers you already received are generally excellent, especially with regard to the income tax issues and what's considered part of the estate versus what's not. I would add that a 1983 Orphans' Court case in Delaware County, PA, In re Johnson Estate, is still widely referred to for the executors' and counsel fee schedules that Judge Jamison developed there.
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