E302 Minimum Estate Size for a Professional Executor

What is the minimum estate size that a professional executor will accept? A few prospective clients have called asking, so we’ll review bank executor minimums, our minimums, and some exceptions.

Bank executor estate minimum size requirements

Typically, bank minimum sizes are high. In New York, it has been as high as 5 million or 2 million liquid assets held with the institution. In most cases, the bank wants an estate with mostly liquid assets. It’s too much of a pain for them to deal with real estate, etc. They also want those liquid assets held at their bank. The bank generates fees and they get to have those assets invested in their products.

Our estate size requirements

We generally try to fill the niche between folks who have an estate large enough to need our services, but not large enough to use a bank as an executor. Generally, we’ve set the bar as low as $250,000, and we do not have a liquidity requirement. However, we do want to make sure there are enough liquid accounts to fund estate expenses. Usually $50,000 in liquid assets is plenty to cover estate expenses.

You’ll need to make sure the account with liquid funds does not have beneficiary designations. If you name a beneficiary on an account, that account will go directly to the beneficiary. This means the executor won’t have access to the account to pay for estate expenses.

These requirements may not be hard for many clients to meet, but we have run into some problems in the past. The biggest issue is beneficiary designations. Naming beneficiaries on an account means that the account will not go through probate. If there are only a handful of small accounts in your name alone (no beneficiaries), it’s not really worth it for a professional executor to do all the work and deal with all the taxes and creditors without much compensation. Compensation is based on the size of the estate.

A problem for New York clients is that many co-ops do not allow the ownership shares to be moved into a trust or have a beneficiary designations. This creates a need for a professional executor, even if your other assets are in trust or have named beneficiaries.  If you must have an executor to deal with your co-op, then you must make sure you leave at least one account of sufficient size (with no beneficiary designations) to go through probate.

Again, your executor needs enough liquid assets to cover fees, clean out costs, and other costs to sell your co-op. If you don’t leave sufficient liquidity, a professional executor will not accept. You don’t want to waste your time researching and choosing an executor who won’t accept based on your low liquid assets.

What if my estate is too small?

We do make exceptions for our clients and try our best to help.

One helpful tip is to add language to your will or trust setting a minimum fee. Even if your estate is below $250,000, you can state that you want your executor to receive at least a certain amount. That way, you are guaranteeing that your executor gets paid even if the size of your probate estate is small.

Even if your estate is small, you should still leave sufficient accounts without beneficiary designations so that your executor has funds to work with. And don’t just leave that one perfect account, because that leaves little margin for error. If you forget and start spending from that account, then your executor may not accept due to low liquid assets.

Lastly, if you want a professional executor to administer a small estate, do your best to minimize the drama. If you think there will be conflicts with heirs or a contested will, you may want to consider a revocable trust. Also, do a decent job of record keeping. Your executor won’t want to deal with a huge forensic accounting problem for a small estate. In summary, make sure your estate is cost-justifiable for your professional executor to accept.

You can learn more about choosing a professional executor in my book, “How to Hire an Executor.”

Feel free to send questions via comments or email. We will do our best to answer them either directly or as the subject of a podcast.

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