There are so many important decisions you need to make when setting up your last will and estate plan. People can overlook some of the more important considerations, perhaps because they aren't familiar with standards for last wills and estate administration.
The average person creating a last will understands how important it is to name the right person as executor of the estate or trustee. Too often, the testator may overlook specifically allocating compensation to the executor for their efforts.
Taking the time to consider what is fair and what is standard can help ensure that you have the ability to convince someone to assume this difficult and demanding role. Creating an estate plan that compensates your executor or updating your existing last will to add compensation is a good idea, in most cases.
Estate administration costs 2 percent or more of the value of the estate
Depending on how you structure your estate, there are many different ways in which you can compensate the individual serving as the executor. In some cases, you may choose to allocate additional assets to that individual.
Whether it is a specific item that your executor wishes to receive or a special account, setting aside particular bequests and gifts for the executor or administrator is a smart move. Specifically naming assets or accounts for the benefit of your executor is a simple way to compensate that person for the efforts they will undertake on your behalf.
In other circumstances, you can allocate a percentage of your estate to the executor. If the Colorado probate courts must handle this on your behalf, two percent is the standard executor payment for average-size estates. The amount they allocate may go up depending on the complexity of your estate.
Using a percentage is a wise decision, because it incentivizes your administrator or executor to do the best job possible and maximize how much they make from estate sales and property sales while handling your last will. It is possible that a family member would fulfill this role without compensation, but rewarding them for their efforts is a good choice if you have the assets available to do so.
Serving as an executor is hard work that deserves compensation
Naming someone you trust as executor of your estate is an honor. However, it is also a burden and responsibility. Choosing to allocate financial resources to offset the stress and effort required is a wise decision. Not only will that motivate your executor to do their best job, but it will ensure that the individual you choose knows how you valued their efforts.
Whether you have just started creating your estate plan or have already named an executor, you should review what compensation you offer to the person you entrust with handling your estate after you die.