"It is what it is," he explained. "But, like anything that is definite, the fee is arbitrary."
Two estates can be the same size but vary widely by complexity, explained professor Jeffrey Cooper of Quinnipiac Law School and formerly a partner of Cummings and Lockwood of Stamford, Conn. The more complex estate can take substantially more time to administer. If the fee were determined solely on size, the scope of the work may be greater or less than is compensated by the fee.
There are other factors to consider, which brings up the importance of having a conversation with your lawyer during the estate-planning process.
"The crucial question for the testator is: How is the estate administration going to work out when I'm gone," said Cooper.
Who will be involved in the administration? Who will be in charge? How well will the team work together? Who will be responsible for what? What will the costs be? Will there be any overlaps or gaps in expertise or duties? What services will be included in the executor's fee? What attorney fees will be charged? If an attorney is both the executor and the lawyer for the estate, how will that work?
Who you will want to serve as executor also will make a big difference. For example, if you are married, naming your spouse as executor can save money. Normally, spouses would serve for free, since the executor fee would be taxable as income to the spouse. He or she would get legal help by hiring an attorney to provide legal counsel as needed, presumably charging on an hourly basis.
On the other hand, if you want your friend to serve as executor for free, there is no telling whether he will accept the appointment. A bank serving as executor will not take on an assignment unless compensated, of course. Fee schedules vary they can be higher or lower than statutory rates, and they can be negotiated.
If retaining a bank, be sure to pin down the duties covered in the engagement, advised Claudio De Vellis of Kleinberg Kaplan, a New York law firm.
"The testator should be careful, because the banks may charge a percentage of the gross estate, meaning charge a commission on probate and nonprobate assets," explained De Vellis. "One way to keep the bank in check is by having the testator appoint the bank along with a family member as co-executors. He or she could also permit the family member to remove and replace the bank as co-executor or permit the family member to negotiate the bank's fee."
In any event, the testator can and should take an active role in planning. No matter the state, the testator can set out in his will who he wants to serve as executor and what he wants his estate to pay for those services.
For example, if you live in a statutory state, you can have a provision in your will that directs the executor to be paid the lesser of a statutory fee or a specific negotiated fee, said Olivieri. That direction will take precedence over the statute.
One more point: Which state's laws will apply in determining the executor's fees? The testator's domicile will determine where the estate is probated, said attorney Roxanna Hammett of Wolff and Samson, a New York and New Jersey law firm.
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford, Conn.) and award-winning author, welcomes your questions/ comments (firstname.lastname@example.org).