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Vermont Executor Fee: Is It Taxable, and Can You Waive It?

Two questions that go together: compensation is always taxable income, which is exactly why so many family executors choose not to take it.

IRS Publication 559 · 14 V.S.A. § 1065 FigureMyTax Editorial Team

By the FigureMyTax Editorial Team · How we calculate

Quick answer: Yes, the compensation is always taxable, and yes, a Vermont executor can decline it. All executors and administrators must report compensation as gross income — there's no exception for a one-time family fiduciary. What changes is how it's taxed: a family member handling a single estate generally owes regular income tax only, while someone in the trade or business of serving as a fiduciary also owes self-employment tax. Estimate your Vermont compensation first with the executor fee calculator.

Part 1: is it taxable?

The trade-or-business test

IRS Publication 559, Personal Representatives: if you aren't in the trade or business of serving as a fiduciary — for instance, you're administering a relative's estate as a one-time matter — you report the compensation as other income on Schedule 1 (Form 1040), line 8z. If you are in that trade or business — typically a professional fiduciary or someone who does this repeatedly — you report it as self-employment income on Schedule C, which brings in self-employment tax.

Why it matters: self-employment tax

Self-employment tax adds 15.3% (Social Security and Medicare combined) on top of regular income tax, calculated on Schedule SE. A one-time family fiduciary in Vermont generally avoids this layer entirely by reporting on Schedule 1 instead of Schedule C — the compensation is still taxed as ordinary income, just without the extra 15.3%.

Does a 1099 change anything?

No. A Form 1099 (whether 1099-NEC or 1099-MISC) is a reporting mechanism, not the rule itself. Getting a 1099 doesn't automatically mean you're "in business" as a fiduciary, and not getting one doesn't mean the compensation isn't taxable. Report the income according to the trade-or-business test above regardless of what form, if any, you receive.

Worked example: the tax treatment

An executor administers a parent's Vermont estate worth $500,000, taking an illustrative 3% commission — $15,000. As a one-time family fiduciary: reported as $15,000 other income, Schedule 1, line 8z; no self-employment tax; regular federal income tax owed at the fiduciary's normal rate. A professional fiduciary handling the same estate would instead report it on Schedule C, owing both income tax and the 15.3% self-employment tax.

Part 2: should you waive it?

Two different scenarios, two different mechanisms

14 V.S.A. § 1065: if the will sets the executor's compensation, waiving it specifically means filing a written renunciation with the Probate Division of the Superior Court — the mechanism the statute actually describes. If no will provision is in play, or the renunciation has already happened, simply not requesting a fee under the reasonable-fee standard achieves the same practical outcome without a separate filing requirement spelled out in the statute.

Renouncing the will's clause doesn't mean getting nothing

§ 1065: renouncing a will's specific compensation provision, in writing filed with the Probate Division, opens the door to the statutory reasonable-fee standard instead — not to zero compensation. That's a deliberate choice between two different compensation paths, not a waiver of payment altogether.

Why executors waive the fee

  • The tax difference. Compensation is taxable income, as shown above; an inheritance generally isn't. A beneficiary-executor sometimes ends up with more after-tax money by skipping compensation and simply inheriting the full share instead.
  • Family dynamics. Taking compensation out of the estate reduces what's left for other heirs. Some executors decline it to avoid that friction, especially on a modest estate.
  • It was never expected to be paid. Many family members step in assuming the role is unpaid, without realizing Vermont law actually allows compensation by default.

Make it a deliberate decision

Say it out loud: compensation is available under § 1065 by default, whether through the will's clause or the statutory reasonable-fee standard. An executor who assumes they won't be paid may later find other heirs expected exactly that — or discover, only when someone asks, that compensation was available all along. Discuss it openly with beneficiaries, ideally before administration is far along, so the decision to seek it (or not) is made knowingly.

Worked example: the full tax tradeoff

An executor who is also the sole heir administers the same Vermont estate, considering the illustrative $15,000 compensation.

  • Takes the compensation: $15,000 taxable income (per the rules above), reducing what's left in the estate to distribute by $15,000.
  • Waives it: the $15,000 stays in the estate and passes to the fiduciary as part of their inheritance instead — generally not taxable income to them.

Simplified for illustration; actual tax outcomes depend on the fiduciary's full financial picture. Consult a CPA before deciding.

Facing probate in Vermont?

A local probate attorney can review your estate — many offer a free consultation.

Talk to a Vermont attorney

Vermont executor fee taxes & waiver — frequently asked questions

Is the Vermont executor fee taxable?

Yes. All executors and administrators must report compensation as gross income under IRS Publication 559. A one-time family fiduciary reports it as other income with no self-employment tax; a professional or repeat fiduciary owes the additional 15.3% self-employment tax.

Can a Vermont executor waive their compensation entirely, even if the will sets an amount?

The statute's renunciation mechanism handles a will's clause specifically, via a written instrument filed with the Probate Division. Simply not requesting a fee has the same practical effect otherwise.

If a Vermont executor renounces a will's compensation clause, do they get nothing?

No — renouncing it opens the door to the statutory reasonable-fee standard instead.

Does a Vermont executor need court approval before taking compensation under the will's clause?

The will's provision is full satisfaction by statute and operates on its own, though the court can still order otherwise.

Does waiving the Vermont executor's compensation also affect what an attorney for the estate can charge?

No — the two are assessed separately, so waiving one has no automatic effect on the other.

Keep going

Vermont Executor Fee CalculatorYour estimate + PDF Vermont Executor Fee: How Much Is It?Expenses, fees, the will's clause Vermont Co-Executors: How Is the Fee Split?Multiple executors Vermont Probate Cost CalculatorThe full cost picture

Estimate for general guidance only, not tax or legal advice. Based on IRS Publication 559 and 14 V.S.A. ยง 1065. The federal tax rules apply the same way regardless of state; only the underlying compensation amount is Vermont-specific here. Whether self-employment tax applies depends on your specific facts. Consult a CPA or Vermont probate attorney for your situation before filing or deciding.