Texas Executor Compensation: The 5% Rule and What It Actually Pays

Most executors in Texas assume they will be paid a percentage of the estate's total value. That assumption is wrong in almost every case, and the gap between expectation and reality can be significant.

Texas Estates Code Section 352.002 sets the standard commission at 5% — but not on the gross estate. The 5% applies only to cash that the executor actually receives into the estate or pays out from the estate during administration. Three major categories of cash are explicitly excluded from the calculation, and they are exactly the categories that make up most of the money in a typical Texas estate.

What the 5% Commission Actually Covers

The statute allows a 5% commission on:

• Cash receipts: money the executor actively collects and brings into the estate (rents, dividends, proceeds from selling estate property)
• Cash disbursements: money the executor pays out to satisfy debts, taxes, and administrative expenses

The math here rewards effort on active transactions. If the executor sells a rental property for $200,000, the $200,000 in sale proceeds counts as a cash receipt, yielding a $10,000 commission. If the executor then pays $12,000 to a funeral home, that $12,000 disbursement yields a $600 commission.

What the 5% Commission Explicitly Excludes

Section 352.002 carves out three categories from the commission base, and each one eliminates a type of transaction executors commonly assume they will be paid on:

1. Cash on hand at the time of death Any money already sitting in checking or savings accounts when the person died does not count. The executor did not collect it — it was already there. Simply transferring an existing $80,000 savings account to the estate account generates zero commission under the statute.

2. Life insurance proceeds collected by the estate Life insurance paid to the estate (as opposed to a named beneficiary) sounds like it should generate a commission since the executor has to make the claim and handle the money. The statute says it does not. A $500,000 life insurance check deposited into the estate account earns the executor $0 in statutory commission.

3. Final distributions to heirs and legatees When the executor distributes the remaining estate balance to beneficiaries, that cash disbursement is excluded. Writing a $200,000 check to a beneficiary at closing does not count toward the commission base.

A Concrete Example

Consider an estate with:

• $150,000 in bank accounts at time of death
• $250,000 life insurance payout to the estate
• One investment account sold during administration for $80,000
• $25,000 in debts paid (funeral, medical, credit cards)
• Final distribution of $455,000 to heirs

The executor's commission calculation:

The estate was worth close to a million dollars. The executor earned $5,250 under the statutory formula — just over half of one percent of the gross estate. This is why executors who expected 5% of $960,000 ($48,000) are often shocked when they consult an attorney about their compensation.

Can the Court Increase the Commission?

Yes. Section 352.002 gives the probate court discretion to award additional compensation if the statutory formula produces an amount that is unreasonably low given the nature and extent of the executor's services. Courts have approved above-statutory compensation when:

• The executor managed and operated a business for an extended period
• The estate involved complex litigation or contested creditor claims
• The property required substantial active management (farm operations, rental properties with maintenance issues)
• The administration stretched over years rather than months

To request additional compensation, the executor must petition the court and present evidence of the extraordinary services rendered. This is not automatic — the court can deny the increase if it finds the statutory amount is reasonable for the work performed.

Waiving the Commission

Many executors who are also beneficiaries — a surviving spouse or an adult child inheriting from a parent — waive the commission entirely. From a tax perspective, commission is income and taxed as ordinary income. Taking money as an inheritance instead of as compensation has no income tax consequence if the estate is not subject to federal estate tax. For most Texas estates (federal estate tax applies only to estates above $13.6 million as of 2026), taking no commission is the financially smarter choice.

What Executors Need to Know Before Accepting the Role

The compensation picture is only one part of understanding executor duties. Before the commission question matters at all, the executor must:

• File the will within four years of death (the Texas Estates Code deadline)
• Qualify with the court and file an Oath of Office within 20 days of appointment
• Publish a notice to creditors within one month of receiving Letters Testamentary
• File an inventory and appraisement of all estate assets within 90 days of qualifying
• Notify all named beneficiaries within 60 days of probating the will
• File an Affidavit of Notice with the court within 90 days

Missing these deadlines creates personal liability for the executor and can result in removal by the court. The executor's compensation is the last thing the court addresses — getting the procedural steps right is what protects the executor from personal liability throughout the administration.

The Texas Probate Process Guide walks through the full executor workflow in sequence: the notice matrix, the inventory deadline, how to handle creditor claims, and when to use an Affidavit in Lieu of Inventory to protect the family's financial privacy. It covers both the executor's duties and the compensation formula in the context of running an actual independent administration from opening to final distribution.

Key Takeaways

Texas law pays executors 5% of cash actually received or paid out during administration — not 5% of the gross estate. The three largest exclusions are cash on hand at death, life insurance proceeds, and final distributions to heirs. Most executors of typical Texas estates earn substantially less than they expect. Courts can award additional compensation for extraordinary services, but this requires a formal petition. Executors who are also beneficiaries should evaluate whether waiving the commission makes more sense than receiving taxable income.

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