Trustee Fees: Guideline for Trustee Compensation
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Trustees are the main person responsible for following the wishes of the creator of the trust (trustor) as articulated in the trust agreement, and are responsible for overseeing the management and distribution of the trust assets. A trustee is often a close friend or family member of the trustor, however, whether trustees have a personal connection to the trustor or not, they are almost always given a trustee fee for performance of their duties.
Typical Trustee Fees
The trustee fee arrangement varies depending on the state fee schedules for trustees and the specific terms and conditions written out by the trustor. Professional trustees rarely charge less than a 1% of the total worth of the estate as a fee. This standard fee also serves as a base rate for relatives or close friends of the trustor that serve as the trustee because laws assume he or she will be performing the same duties that a professional would have been.
Although 1% of the estate is the base fee, the level of skill in handling probate and estates varies, and so can the trustee fees. It will depend on the discretion of the trustor, the experience of the trustee, the complexity of managing the trust, and any personal arrangements the trustor may have had with the trustee. Regardless of the work and experience of the trustee, the trustee fees will typically not be significantly higher than 1% of the estate.
When a Court Can Adjust a Trustee Fee
In most situations, the law assumes the trustor chose a fee amount for the trustee in good faith and does not interfere with the trustee fee agreement. Occasionally, however, circumstances of the asset distribution end up being drastically different than possibly anticipated. For example, if the trustee fee is set at 1%, but the estate ends up tied up in taxes and the situation drags on for years, with challenges or court actions, with the trustee putting in hours and hours of work above and beyond the usual than the trustee may petition the court to allow for a greater fee. This will depend upon the state where the person lives because state laws will vary, and in some states the court has more power to make reasonable adjustments to the trustee fee.
Getting Legal Help
If you have any questions about a trustee fee, whether for yourself, a loved one, or a professional you’re considering hiring, you should speak to a lawyer or financial adviser. Calculating trustee fees is an important part of valuing your estate and protecting the interests of your beneficiaries.