Alabama Executor Fees: 2.5% Formula, Limits, and Approval

Executor fees in Alabama are capped at 2.5% of everything the executor collects for the estate plus 2.5% of everything the executor pays out, and the probate court decides what’s actually reasonable within that ceiling.¹ The percentage is a maximum, not a guaranteed payout. A simple estate may generate a smaller fee, and a complicated one may generate a larger one if the executor petitions for extra compensation.

How the 2.5% Formula Works

Under Alabama Code Section 43-2-848, compensation is calculated on two separate figures: total receipts and total disbursements. Each side is capped at 2.5%.¹

Receipts are the money and property that come under the executor’s control during administration. Bank balances, investment proceeds, rental income collected while the estate is open, and cash from selling estate property all count. Disbursements are everything the executor pays out: the decedent’s final bills, funeral costs, taxes, and distributions to beneficiaries at closing.

A worked example. If the executor collects $400,000 in assets and income, the receipts side of the fee tops out at $10,000. If the executor then pays out $350,000 in debts, expenses, and inheritances, the disbursements side tops out at $8,750. The maximum fee on that estate is $18,750.

Only property actually handled by the executor counts. The statute limits the fee to property “received and under the possession and control” of the executor.¹ Life insurance paid to a named beneficiary, retirement accounts with designated payees, and jointly held bank accounts pass outside probate and never enter the calculation.

What the Court Weighs Within the Cap

Two estates of the same dollar value can produce very different fees, because the court looks past the numbers to the work actually done. The statute directs judges to consider a range of factors:

Difficulty of the administration, such as business interests or out-of-state property
Skill required, including investment management or tax complications
Customary fees paid in the same county for comparable estates
Results obtained, meaning whether the executor preserved or diminished estate value
Time and effort the administration demanded
The executor’s experience and ability, which may differ between a professional fiduciary and a family member
Risk and liability exposure, particularly with heavy debts or pending litigation

These factors can pull the fee down as easily as they can support the full 2.5%. A short, straightforward administration by a family member may draw a fee well below the cap.¹

Extra Pay for Extraordinary Services

Some administrations demand work that goes well beyond collecting assets and writing checks. Alabama law lets the court award additional compensation on top of the standard formula when the executor performs extraordinary services.¹

Qualifying work usually involves running the decedent’s ongoing business, handling contested litigation for the estate, managing complicated real estate sales, or resolving disputed creditor claims. The extra pay is not a percentage. The executor petitions the court with a detailed account of the additional work, the hours involved, and the benefit to the estate, and the court sets a fair amount. Without a petition and a court order, no compensation above the standard formula is authorized.

When the Will or a Written Agreement Sets the Fee

A will can fix the executor’s compensation at any amount, higher or lower than the statutory guideline, or provide that the executor serves without pay. That provision generally controls.

An executor is not stuck with it, though. Under Section 43-2-848(c), the executor can renounce the will’s compensation terms and ask the court for reasonable compensation under the standard framework.¹ The renunciation is filed with the court. If no alternate executor named in the will is willing to serve at the will’s stated compensation, the original executor serves and receives reasonable compensation as the court determines. An executor can also renounce all or part of the fee, which family members serving as executor sometimes do when they are also beneficiaries.

Section 43-2-848(d) offers another route. The decedent, or all affected beneficiaries, can enter a written agreement with the executor setting the amount or the method for calculating the fee. If the executor accepts the appointment under that agreement, it binds everyone, provided the terms are not unconscionable.¹ This matters most when the executor is a bank trust department or an attorney and the family wants certainty about cost upfront.

Attorney Fees Are Paid Separately

The executor’s compensation does not cover the estate’s legal work. Attorney fees are a separate administration expense the estate pays on its own. Under Section 43-2-682, the probate court can fix and allow both the executor’s fee and the attorney’s fee at any annual, partial, or final settlement.² Both come out of estate funds before beneficiaries are paid, and hiring counsel does not reduce the executor’s own commission.

When the Fee Gets Reduced or Lost Entirely

Compensation is not automatic. Alabama holds executors to a fiduciary standard, and mishandling estate property or exercising authority improperly exposes the executor to personal liability for any resulting loss.³

The court can also remove an executor for neglect, failure to file required accountings, failure to post a bond when ordered, or any other good and sufficient cause. Removal ends the right to further compensation.

Short of removal, a judge reviewing a fee petition can trim or deny the request. Unexplained delays, sloppy records, or billing for work that was not done are all grounds to cut the fee. The approval process is designed to catch those problems before money leaves the estate.

Getting the Fee Approved and Paid

An executor cannot set a number and pull it from the estate account. Payment runs through the court’s settlement process. The executor files a petition for settlement with a full accounting: every asset collected, every bill paid, every distribution made, supported by vouchers and sworn statements. The fee request is part of that accounting.

Alabama allows the court to fix compensation at any annual, partial, or final settlement, so a long administration does not force the executor to wait until closing for any payment at all.² Beneficiaries and creditors receive notice and can contest the accounting or the fee. Only after the court enters an order approving the payment can the executor take the money.

Taxes on the Fee You Receive

Executor compensation is taxable income and must be reported on your federal return.⁴ How you report it depends on whether you administer estates as a business. A one-time fee for handling a family member’s estate is typically reported as other income. A professional fiduciary reports the fee as self-employment income, which brings self-employment tax on top of regular income tax.

On the estate’s side, commissions actually paid are deductible as an administration expense, provided the amount is consistent with what’s customary for estates of similar size in the same jurisdiction.⁵ No commission paid means no deduction, and a bequest left to the executor in place of a commission is not deductible. For an executor who is also a beneficiary, waiving the fee avoids income tax on the compensation but costs the estate a deduction, so the right choice depends on the estate’s size and the executor’s own tax picture.

1
Alabama Legislature. Alabama Code 43-2-848 – Compensation of Personal Representative
2
Alabama Legislature. Alabama Code 43-2-682 – Court May Allow Fees or Other Compensation
3
Alabama Legislature. Alabama Code 43-2-840 – Improper Exercise of Power; Breach of Fiduciary Duty
4
IRS. Are the Fees I Receive as an Executor or Administrator of an Estate Taxable
5
eCFR. 26 CFR 20.2053-3 – Deduction for Expenses of Administering Estate