I tried posting this in the alt.lawyers newsgroup, but then I thought maybe it is also something that accountants deal with in doing estate accounting.
In determining executor fees, what is considered part of the estate? Is it the total value of everything that passes to anyone?
For example, if a beneficiary of a life insurance policy receives $100,000 from the policy, is that $100,000 considered part of the total estate for executor's fee purposes even though the money just passed to that person automatically and outside of any probate process?
Same question for a $100,000 P.O.D. (Pay On death) savings account -- the money goes directly to the Payee on death. Is that included in the estate when computing executor's fees?
Same question for retirement account assets that go directly to named beneficiaries.
In other words, does the total estate for executor's fees purposes include EVERYTHING -- even assets that pass directly to individuals by operation of law and outside of the probate process?
I am in New Jersey, but I assume the general rules for deciding what's included in the estate for executor's fees purposes are similar throughout the U.S.
If the decedent was the owner of the policy, then that $100,000 is part of the decedents estate. Whether or not it is a factor in the executor fees depends on the terms of the agreement with the exectuor.
The general rule is that the value of the decedents estate includes everything that is part of the decedents estate, period. Which would include everything you mentioned above.
Now, it's quite poeeible that the executor will not include certian items of the estate in computing their fees.
The reason for my asking is that I am in the process of having a will and estate plan created, and I was wondering if there were ways to keep the executor fees reasonable and fair, but not excessive, in relation to the amount of work involved. My goal is to make the transition of any assets as simple and quick as possible.
Overall, the plan will be for me to set up a living trust now, place everything I own into the trust, name a successor trustee who would carry out the terms of the trust, and also have a will prepared to cover anything that I may have missed. I will then name the trust as the beneficiary on any life insurance policies, retirement plan proceeds, etc. I am not married, have no kids, and own everything in my name only so no spousal rollovers, joint titles with right of survivorship, etc. would apply. I did meet with an attorney who is going to put all of this together for me, and I just have to get back to him with who I want to be the executor, the persons to be named on other documents (like durable power of attorney, etc.), and the beneficiaries to be named in the trust.
In thinking of who to name as executor, I could choose one of the beneficiaries (siblings, etc.) but they all live far away in other states and may not be very good at handling the legalities even if I make the process as simple as possible. I am thinking about naming a person that I know and trust and who I already know would be good at handling the process. But, before talking with that person, I wanted to find out a little about how the executor fees work. That's why I was wondering if by having a lot of assets just pass automatically (almost), would those assets not typically be included in calculating executor fees. For example, if I had a $500,000 life insurance policy (which I don't), would the executor be entitled to the statutory 3-5% executor fees on that amount and essentially be able to get $20,000 for just sending a death certificate to the life insurance company and having the insurance company write a check to the beneficiaries.
Of course, I can just ask the lawyer I am using, and I will, but he won't be back to start drawing up the documents until the middle of next week. I forgot to ask him this question when I met with him. So, in the meantime, I thought I'd put the question out there for some feedback. I'm usually very good at doing google searches and finding these things on the internet, but I just can't seem to find my question addressed anywhere.
Also, as you suggested, the person I have in mind for executor is someone I trust and with whom I can easily just discuss the executor fees question.
Sorry about this long and detailed response, but I thought that since I posed the question it would make sense to provide a little more information about why I asked.
Trustee fees are always based on the trust assets/transactions, which are entirely different than the estate assets. While the pensions, IRA's, and life insurance may be part of the estate, they are not always part of a trust. So keep that in mind.
An executor of an estate has a lot of stuff to deal with, so don't cheapen their time.
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