Most people, when appointed to serve as the personal representative of a Colorado probate estate, focus primarily on their obligations, and not on the prospect of compensation. The work of a personal representative is important, and may be burdensome, so it’s entirely fitting that a personal representative be compensated. In addition, the personal representative may retain an attorney to advise him or her in the administration of the estate. The attorney’s fees, like those of the personal representative, are paid from estate funds. But how much compensation is appropriate?
Determining Reasonable Compensation for a Personal Representative
Colorado law states that a personal representative “is entitled to reasonable compensation for his or her services.” What is reasonable? That depends on a number of factors, including the value of the estate, the complexity of the estate administration, and the actual amount of time a personal representative puts into the administration. An estate with a high value, but a straightforward, uncomplicated administration, does not necessarily call for a high fee. A personal representative who is a professional, such as a CPA, may be able to command a higher fee than a family member.
Most estate administrations in Colorado are informal, and the court typically will not investigate the appropriateness of a personal representative’s fee unless asked to do so by an interested party, such as an heir. Colorado probate rules state that a court has the authority to inquire as to the appropriateness of a personal representative’s fees in unusual circumstances. Further, Colorado case law affirms that when fee charges appear not to conform with criteria for reasonableness, unusual circumstances exist.
If you are a personal representative of a Colorado estate, the best way to protect yourself against the appearance that fees you’ve charged are unreasonable is to keep meticulous records. Document all time that you spend on the estate’s administration, detail tasks you perform, and keep copies of all correspondence and filings.
Should You Accept Compensation?
Although a personal representative of a Colorado estate is entitled to compensation for his or her services, there is no requirement that compensation be accepted. There may, in fact, be reason to renounce compensation. Compensation paid to a personal representative is taxable as income.
If the personal representative is a family member and heir, it may make sense from a tax standpoint to renounce compensation and only to accept the distribution to which one is entitled. This should be discussed with a professional before a decision to renounce compensation is made.
Overseeing the administration of an estate as a personal representative carries not only responsibility, but the potential for personal liability if the job is mishandled. It’s always wise to have experienced legal counsel. We invite you to contact the experienced estate planning and probate attorneys at Davis Schilken at 303-670-9855 to arrange a consultation at one of our two locations in The Denver Tech Center and Golden, Colorado. We look forward to working with you.