Choosing an Executor: Duties, Compensation, and Pitfalls

Why the executor choice matters

Choosing the right executor is one of the most consequential decisions in estate planning. The executor not only carries out your wishes; they also handle legal filings, tax obligations, creditor claims, and the practical work of transferring property. A poor choice can slow the probate process, increase fees, trigger family disputes, or leave tax liabilities unaddressed (IRS Publication 559 explains executor responsibilities in detail: https://www.irs.gov/pub/irs-pdf/p559.pdf).

In my 15 years advising clients, I’ve seen estates stall because an executor lacked time, grit, or basic record-keeping skills. I’ve also seen professional executors speed administration and reduce conflict—especially when estates include businesses, investments, or out-of-state property.

Quick checklist for naming an executor

• Honesty and trustworthiness: must manage assets responsibly.
• Organization and follow-through: probate is paperwork-heavy.
• Availability: willing to spend months (sometimes years) on administration.
• Basic financial literacy or willingness to hire professionals.
• Geographic practicality: if multiple states are involved, consider a professional or local co-executor.

If you need a short starting point, use this three-step test: (1) Can they manage paperwork and deadlines? (2) Can they work with professionals (attorneys, accountants)? (3) Will they communicate openly with heirs?

Core duties of an executor (step-by-step)

Executors follow state probate law and any court supervision. Typical duties include:

1. Obtain the death certificate and locate the will. Draw several certified death certificates for banks, insurers, and government agencies.
2. Open a probate case if required by state law and obtain letters testamentary or letters of administration from the probate court.
3. Take custody of estate assets: secure property, inventory assets, and value the estate as of date of death (or alternate valuation date if applicable).
4. Notify beneficiaries and likely creditors. Federal and state guidelines require certain notices to be sent.
5. Pay final bills and valid creditor claims from estate funds. This includes medical bills and funeral expenses.
6. File the decedent’s final income tax return (Form 1040) and any estate tax returns (Form 706) if the estate meets federal or state filing thresholds. See IRS guidance and Publication 559 for filing rules and deadlines.
7. Resolve disputes or claims against the estate. That may involve litigation or negotiation.
8. Distribute remaining assets according to the will, after court approval if probate requires it.
9. Close the estate with the court and provide heirs with final accounting and receipts.

Note: Some states impose specific timelines for creditor notice and claims; missing these windows can increase personal exposure. Consult state probate rules or an estate attorney.

Taxes and filings: what executors must know

Executors often must file multiple returns:

• Final individual income tax return for the decedent (Form 1040) covering the part of the year up to death.
• Estate income tax returns (Form 1041) if the estate earns income during administration.
• Federal estate tax return (Form 706) if the gross estate exceeds the filing threshold (this threshold can change; check current IRS guidance each year).

Executors should preserve documentation for basis adjustments, gifts, and valuations. For practical guidance on tax-specific steps, see our internal guide on filing final tax returns for executors and the IRS Publication 559 (https://www.irs.gov/pub/irs-pdf/p559.pdf).

Compensation: how executors are paid

Executor compensation varies by state and by choice in the will. Common methods:

• Statutory fee (percentage-based): Some states set a standard scale (for example, a percentage of estate value) for executor fees. Typical ranges people negotiate or expect (based on real-world practices) are 1%–5% of the estate, but local statutes may set different formulas.
• Hourly fee: Professionals (attorneys, CPAs, trust companies) often charge hourly rates—commonly $100–$400+ per hour depending on expertise and geography.
• Flat fee: For predictable, small estates, a flat fee may be agreed upon.
• Fee waived: Family executors sometimes waive fees, but that can create tension or unintended inequity among heirs.

Example: On a $750,000 estate, a 2% executor fee would be $15,000. If the estate is complex—business interests, foreign assets, or contested claims—expect fees to rise due to additional time and outside professional costs.

Executor compensation is paid from estate assets and typically requires court approval. If the will specifies a fee, the court usually respects it unless it’s unreasonable. Check state probate statutes or ask an estate attorney for local rules.

Choosing between a family member and a professional executor

Pros of a family executor:

• Lower direct cost (many waive fees).
• Personal knowledge of decedent’s wishes and family dynamics.
• May reduce friction if the family trusts them.

Cons of a family executor:

• Emotional stress and potential bias.
• Limited bandwidth or technical knowledge (taxs, investments, business valuation).
• Greater risk of disputes if beneficiaries disagree on decisions.

Pros of a professional executor (attorney, trust company, CPA, or financial advisor):

• Expertise in probate, taxes, and investments.
• Neutrality that can defuse family conflicts.
• Capacity to manage complex assets and multi-state issues.

Cons of a professional executor:

• Fees can be higher (but often offset by faster, cleaner administration).
• Less personal touch; beneficiaries may resent an outsider if not communicated beforehand.

When to consider a professional: if you own a business, sizable investment accounts, out-of-state real estate, complex tax issues, or expect contested claims. See our related guide on selecting the right fiduciaries: trustees, agents, and executors for a deeper comparison.

Common pitfalls and how to avoid them

1. Naming an executor without asking them first. Solution: ask and confirm willingness in writing.
2. Choosing someone who lives far away or is infirm. Solution: name a local co-executor or successor executor.
3. Failing to update the will after major life events (marriage, divorce, move, new child). Solution: review your estate plan every 3–5 years or after major changes.
4. Underestimating estate liquidity needs (taxes, final bills). Solution: plan for liquidity via life insurance, payable-on-death accounts, or an estate liquidity plan. Our article on estate liquidity planning offers practical approaches.
5. Not leaving a letter of instruction and digital access details. Solution: prepare a short, signed letter with account locations, passwords or access instructions (consider a password manager disclosure), and professional contacts.
6. Choosing an executor who is also a large beneficiary without safeguards. Solution: consider requiring bonding, using co-executors, or appointing a neutral professional in that case.

Practical steps to prepare your executor (and heirs)

• Ask for their agreement to serve and explain the expected workload.
• Provide a current, organized inventory of assets and key documents (life insurance, deeds, account numbers).
• Prepare a short letter of instruction covering digital accounts and where to find passwords, tax returns, and important contacts. For practical setup around online access, see our guide on digital password vaults and estate executors.
• Name successor executors and co-executors where appropriate.
• Discuss compensation preferences in the will (state courts typically approve reasonable fees).
• Coordinate with your estate attorney to ensure the will language accomplishes your intent and reduces ambiguity.

Real-world examples and lessons learned

• Case A: A retiree named a busy sibling who lived abroad as executor. Probate took longer and legal travel costs increased. Lesson: consider location and availability.
• Case B: A decedent with rental properties named a professional executor who engaged a CPA to manage rental income accounting. The estate closed faster and beneficiaries received clearer accounting. Lesson: professional expertise often pays for itself on complex estates.

Frequently asked questions (brief)

Q: Can I change my executor after making a will?
A: Yes. You can replace the executor by updating or re-executing your will while you are alive. Work with an attorney to avoid ambiguity.

Q: What if the named executor refuses or is incapacitated?
A: The probate court will appoint an alternative executor, often following a statutory priority or the next-named successor in the will.

Q: Do executors face personal liability?
A: Executors can face personal liability for breaches of fiduciary duty (mismanaging assets, not following the will, or failing to pay creditors properly). Good record-keeping, court approval for major steps, and professional advice reduce risk.

Where to get authoritative help

• IRS Publication 559: Survivors, Executors, and Administrators (detailed federal tax guidance) — https://www.irs.gov/pub/irs-pdf/p559.pdf
• Consumer Financial Protection Bureau: Managing an Estate — https://www.consumerfinance.gov/consumer-tools/managing-an-estate/
• Consult a local estate attorney for state-specific probate rules and executor compensation statutes.

Final takeaways

Choosing an executor is a balance of trust, competence, and practical logistics. Name someone who can manage paperwork, work with professionals, and communicate clearly with beneficiaries. If your estate is sizable or complex, strongly consider a professional or co-executor arrangement and be explicit about compensation and successor appointments. Preparing a short, up-to-date instruction packet and discussing the role in advance will usually save time, money, and family stress.

Professional disclaimer: This article is educational only and does not constitute legal or tax advice. Consult a licensed estate attorney or tax professional for guidance tailored to your situation.