As you move toward the end of the estate administration process, you will need to pay the estate’s final administration expenses. This includes paying all remaining attorney and accountant fees.
You will also pay yourself for your services as executor or administrator. Other miscellaneous fees owed to tax professionals, investment advisors, or any other professionals on your team need to be covered, and additionally any income taxes owed by the decedent’s estate shall be paid.
Attorney’s and accountant’s fees: For preparation of Form 706 and Form 1041, and for the probate accounting.
Executor’s or administrator’s fee: Pay yourself your executor’s fee, which must be reasonable. You establish your fee in one of two ways: The decedent’s will specifies the amount, or state statute fixes the amount based on a fee schedule. In some jurisdictions, your fee as executor must be considered “reasonably necessary.” Some of the factors that may be considered in determining your fee include the following:
The size of the estate
The complexity of estate matters that you’re called upon to handle
The amount of time you spent administering the estate
How well you did your job
Fees received by others for similar work
The results of your efforts
You’re also allowed reimbursement for reasonable expenses you incurred in administering the estate, from appraiser’s fees you paid out of pocket to the cost of envelopes and postage. Be sure to itemize all such expenses in your accounting so the court can see where the money has gone.
Miscellaneous administration expenses: Pay any other unpaid expenses of administration, including to other professionals and the court. Any funds set aside, which should be minimal at this point, should be kept in a non-interest bearing account to avoid having to recalculate the estate income tax for very small earnings or file another year’s return to satisfy the IRS.
Estate income taxes: Although owing any estate income taxes on the final returns is uncommon, make sure that you pay anything you do owe.
When you’re close to finishing and closing an estate, making final distributions to residuary beneficiaries before you pay amounts still owed for administration can be tempting. Be patient and make sure that all administration expenses are paid first. Otherwise, you may find yourself begging for the residuary beneficiaries to give back some of what they’ve received so you can pay what’s still owed.