Executor Fees in Kentucky: What the Law Says You Can Charge

Taking on the executor role in Kentucky means months of paperwork, court filings, creditor negotiations, and tax returns — often while grieving. Most people don't realize until they're deep in the process that they're legally entitled to compensation for that work. Many waive it out of family obligation. Others take it but do the math wrong, which creates problems when the final settlement goes before the court.

Here's what Kentucky law actually says about executor fees, how they're calculated, and the tax implications you need to understand before you decide whether to take compensation.

What Kentucky Statute Says

Kentucky does not set a fixed percentage for executor compensation in a single clean statute. Instead, KRS 395.150 provides that a personal representative is entitled to "reasonable compensation" for services rendered. Courts and practitioners generally interpret "reasonable" using a traditional benchmark: approximately 5% of the total value of the estate's receipts and disbursements.

That 5% figure is not a statutory cap or a guaranteed floor — it's a widely used starting point that courts apply when evaluating whether a fee is appropriate. An unusually complex estate (contested will, multiple real estate parcels, business interests, Medicaid estate recovery claims) can justify a higher fee. A simple estate that took little time can result in a lower allowance even if 5% sounds reasonable on paper.

If the will itself specifies a fee — either a fixed dollar amount or a percentage — the executor is bound by that amount unless they formally renounce the will's fee provision before accepting their appointment.

What "Receipts and Disbursements" Means in Practice

The 5% benchmark applies to the estate's receipts and disbursements — meaning the money and property that actually flows through the executor's hands during administration. This typically includes:

• Cash in bank accounts
• Proceeds from selling estate assets (real property, vehicles, personal property)
• Dividends, rents, and interest collected during administration
• Life insurance proceeds paid to the estate (not to named beneficiaries directly)
• Retirement account balances paid to the estate

What it generally does not include:

• Assets passing outside of probate by beneficiary designation (IRAs, 401(k)s, life insurance paid to a named beneficiary)
• Jointly held property that passes by right of survivorship
• Real estate held in trust

For a straightforward estate where the house sells for $180,000, there's $40,000 in a bank account, and a $15,000 vehicle is sold, the total receipts might be $235,000. A 5% fee on that would be $11,750 — before any adjustments for complexity or time actually spent.

The Tax Implications of Taking a Fee

This is where many executors make a costly mistake. Executor fees are taxable income to the executor. If you're the adult child of the decedent and you're also a Class A beneficiary, taking a fee means converting what would otherwise be a tax-free inheritance into ordinary income subject to federal and Kentucky income taxes.

On the other hand, if you waive the fee, you cannot claim an estate administration expense deduction on the inheritance tax return for that waived amount.

There's also a double-dipping prohibition under KRS 140.090(h): administration expenses, including executor fees, can be deducted against either the fiduciary income tax (Form 741) or the inheritance tax (Form 92A200), but not both. Before deciding how to structure this, the numbers need to be run both ways.

For most Class A beneficiary-executors settling a simple estate, waiving the fee is often the right financial call — it keeps the money in the family without triggering an income tax event. But for executors who aren't beneficiaries, or who are handling a complex, time-consuming estate, reasonable compensation is entirely appropriate and courts expect it.

Documenting Your Time and Work

Whether you ultimately take a fee or not, keep contemporaneous records of everything you do. This matters for two reasons.

First, the final settlement filed with the District Court (Form AOC-846 or the simplified Form AOC-850) requires accounting of all receipts and disbursements. If another beneficiary challenges the fee as excessive, your documentation is your defense.

Second, if the estate is complex enough that you need to hire an attorney or CPA, your records help demonstrate where professional time was actually needed — which supports the professional fees as legitimate estate expenses.

A simple log noting dates, hours spent, and what was accomplished (phone calls with the bank, preparation of the inventory, communication with the Department of Revenue) is sufficient. You don't need a formal time-billing system, but you do need something written down before the court date.

The $5,000 Funeral Expense Deduction Is a Separate Issue

A common confusion: the Kentucky inheritance tax allows a deduction for funeral expenses under KRS 140.090, capped at $5,000. This is not the same as executor compensation. Funeral expenses (including monument costs and cemetery lot maintenance) reduce the taxable estate before the inheritance tax is calculated. Executor fees are a separate deductible administrative expense, not subject to that $5,000 cap.

Executors who conflate these two categories either over-deduct funeral costs or understate their administrative expenses. The Kentucky Department of Revenue enforces the $5,000 funeral expense limit strictly, so getting this right on Form 92A200 matters.

When the Will Waives Bond — and What That Means for Fees

If the will expressly waives the requirement for the executor to post a fiduciary bond (Form AOC-825), the court can honor that waiver. This saves the estate a bond premium, which can be significant for larger estates. The existence or absence of a bond does not affect the executor's right to a fee — those are independent issues.

However, if all beneficiaries execute waivers consenting to an informal final settlement (using Form AOC-850 rather than the formal AOC-846), the executor's fees and the overall accounting still need to be disclosed in the settlement document. Court approval of an informal settlement is the formal mechanism through which the executor is discharged from liability — so the fee needs to be visible and consented to.

Getting the Estate Closed Correctly

Executor compensation is one piece of a larger administrative puzzle. The Kentucky District Court requires the executor to file an inventory within 60 days of appointment, navigate the six-month creditor window, pay inheritance taxes (with the 5% early payment discount available at nine months), and file a final settlement before the estate can be formally closed.

The Kentucky Final Tax & Estate Tax Guide covers the full executor timeline — including how to structure the final settlement, how to calculate deductible expenses on Form 92A200, and how to use the informal settlement process to avoid the more demanding formal accounting. If you're handling this without an attorney, having a sequenced roadmap for each phase significantly reduces the risk of a step that delays the estate's closing or triggers a court hearing you didn't anticipate.

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