How Executor Compensation Works in Texas and Arkansas

Key Takeaways:

• Texas generally bases executor compensation on qualifying cash received or paid during Estate Administration.
• Arkansas uses a percentage schedule for fully administered personal property, subject to court review.
• A will may address compensation, and executors should document their work before taking a fee.
• Executor compensation is generally taxable income and can reduce the amount distributed to beneficiaries.

Being named executor of someone's estate is an honor, but it is also a significant commitment. Gathering assets, notifying creditors, managing Probate proceedings, communicating with beneficiaries, filing tax returns, and distributing the estate can consume months of a person's life. Most people accept the role without ever asking whether they will be compensated for it. 

The Texas and Arkansas Estate Planning Lawyers at Ross & Shoalmire, P.L.L.C. guide executors through the compensation process, including documenting their work, calculating a permitted fee, and responding to beneficiary objections.

What Is Executor Compensation?

Executor compensation — sometimes called executor fees, commissions, or personal representative fees — is the payment an executor receives for administering a decedent's estate. It is distinct from reimbursement for reasonable and necessary out-of-pocket expenses incurred while administering the estate, which may be claimed separately from compensation.

Executor compensation is generally treated as an Estate Administration expense and paid from Estate assets, subject to the will, applicable state law, available funds, and any required court review.

Many people assume that serving as executor for a family member means volunteering their time free of charge. Both Texas and Arkansas law permit qualifying executors or personal representatives to receive compensation, including family members and beneficiaries, subject to the will and applicable legal restrictions.

Executor Compensation in Texas

Texas generally uses a statutory commission rather than a percentage of the estate’s total value. The calculation focuses primarily on qualifying amounts the executor actually receives or pays out in cash during Estate Administration, although different compensation may be available in certain circumstances.

The Five Percent Commission Rule

Under the Texas Estates Code, an executor who properly manages the estate is generally entitled to a commission equal to five percent of qualifying amounts the executor actually receives or pays out in cash during Estate Administration. The commission is not calculated as five percent of the estate’s total value, and several statutory exclusions and limitations may apply. 

A court may award reasonable alternate compensation when the executor manages a farm, ranch, factory, or other estate business or when the standard commission would be unreasonably low. The court may also reduce or deny compensation if the executor fails to manage estate property prudently or is removed from office.

How to Claim Compensation in Texas

The procedure for claiming compensation in Texas depends on the type of administration and the compensation requested. An executor should maintain records of cash received and paid, review the will, calculate the statutory commission carefully, and disclose the fee appropriately in the estate’s accounting or closing records. 

An executor seeking alternate compensation because the statutory commission is unreasonably low or because the executor managed an estate business may apply to the court for approval. Beneficiaries or other interested persons may challenge compensation they believe is improper or excessive.

Because compensation reduces the estate and is generally taxable to the executor, an executor who is also a beneficiary may wish to compare the after-tax fee with the inheritance that would otherwise pass under the will. A Probate Attorney can help evaluate the consequences before the executor waives or accepts payment.

When the Will Addresses Compensation

A will may set a specific fee, provide a compensation formula, authorize reasonable compensation, or direct that the executor serve without compensation. The executor should have the provision reviewed before accepting payment or assuming that the statutory commission applies because the wording of the will and the type of administration can affect the executor’s rights.

Executor Compensation in Arkansas

Arkansas permits just and reasonable compensation, subject to statutory maximum percentages based on fully administered personal property that passes through the personal representative’s hands.  Additional compensation may be available when the representative performs substantial work involving the decedent’s real property.

The Arkansas Compensation Schedule

Arkansas law allows a personal representative compensation that the court considers just and reasonable. Unless an applicable exception applies, the compensation may not exceed:

• Ten percent of the first $1,000
• Five percent of the next $4,000
• Three percent of the remaining value 

These percentages refer to personal property that passes through the representative’s hands and has been fully administered. They are maximum amounts rather than an automatic commission on the estate’s total value. When the personal representative performs substantial duties involving the decedent’s real property, the court may award additional reasonable compensation based on the nature of the work, the property’s value, and other relevant circumstances.

Claiming Compensation in Arkansas

An Arkansas personal representative should review the will, maintain records of property administered and services performed, and account for any compensation paid from the estate. Although Arkansas law permits a representative to set a fee without prior court approval in some circumstances, an interested person or the court may request review, and excessive compensation may have to be refunded.

When Beneficiaries Object to Executor Compensation

Beneficiary objections to executor fees are more common than most executors expect, particularly when the executor is a family member and other family members believe the administration could have been handled faster, more cheaply, or differently. 

A few principles apply in both Texas and Arkansas:

• Careful documentation can help support the fee. Executors should retain account statements, receipts, transaction records, correspondence, descriptions of services performed, and, when relevant, a log of the time spent administering the estate.
• A beneficiary’s objection does not automatically eliminate the executor’s right to compensation. A court may reduce, deny, or require repayment of fees when the amount is excessive or the representative has failed to perform required duties, manage estate property properly, provide an adequate accounting, or comply with court orders.
• An executor who is also a beneficiary may generally receive compensation. The executor should document the basis for the fee and keep compensation separate from distributions received as a beneficiary.

Tax Treatment of Executor Compensation

Executor compensation is generally taxable income to the recipient and is treated differently from an inheritance. Whether it is also subject to self-employment tax depends on the executor’s circumstances, including whether the executor regularly provides fiduciary services or actively operates a trade or business belonging to the estate. A tax professional can advise how the payment should be reported.

An executor who is also a beneficiary should consider that accepting a taxable fee reduces the estate available for distribution, while waiving the fee may increase the executor’s inheritance and the shares of other beneficiaries. The better result depends on the will, the executor’s beneficiary percentage, the estate’s tax position, and the executor’s individual tax circumstances.

What to Do If the Will Is Silent on Compensation

When a will is silent, state law supplies the default compensation rules. Texas generally uses its statutory commission based on qualifying cash received or paid, while Arkansas allows just and reasonable compensation subject to statutory percentage limits on fully administered personal property.

The absence of a compensation clause does not mean the executor must serve without payment. Instead, the applicable state-law compensation rules govern, subject to the type of administration and any required court review. Executors in this situation should consult with a Probate attorney early in the administration process to confirm their rights before they begin incurring significant time and effort.

The Texas and Arkansas Probate Attorneys at Ross & Shoalmire, P.L.L.C. assist executors with every stage of Estate Administration, including opening Probate, claiming compensation, and responding to beneficiary challenges. If you have been named executor or personal representative, obtaining professional legal advice early can help you understand your duties, document your work, and follow the proper procedure for claiming compensation.

Planning Ahead: Addressing Executor Compensation in Your Estate Plan

One of the clearest ways to avoid a family conflict over executor fees is to address compensation explicitly in your Estate Planning documents. A well-drafted will can specify a fee structure, set a fixed amount, authorize reasonable compensation, or direct that the executor serve without compensation. Clear instructions can help family members understand the person’s intentions and may reduce disagreement during Estate Administration.

Our Estate Planning Attorneys help clients throughout Texas and Arkansas build Estate Plans that anticipate these practical realities, not just the legal formalities.