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Trustee compensation

How Much Should A Trustee Be Compensated?

How much should a trustee be compensated?

By
Elissa Suh

How much should a trustee be compensated? Trustee fees vary based on who the trustee is and the complexity of administering the trust. Trustees are an integral part of estate planning — they have a fiduciary duty to distribute assets to the rightful beneficiaries of the trust and also manage the trust’s day to day activities more generally. A trustee’s duties can include filing the trust’s tax return and managing its assets in the least, and for more complex trusts a trustee may even be tasked with making investments or selling real estate. Serving as trustee is a time commitment and carries a lot of responsibility, so it makes sense that a trustee gets paid for their work  — similar to how the executor receives compensation handling the deceased’s estate. (Read about the difference between executor and trustee.) Trustee fees can be calculated a few different ways, depending largely on who the trustee is — friend or family, a lawyer, or even a corporation — and what they do as part of managing the trust.

Key Takeaways

  • A trustee is paid for their services and reimbursed for any out-of-pocket expenses related to trust management

  • Trustee fees may be a fixed amount, an hourly rate, or a percentage of the trust assets

  • The court can help determine trustee fees, including what counts as “reasonable compensation,” if the grantor didn’t specify in the trust agreement

  • A trustee who fails to perform fiduciary duties may not receive their fees

How much are trustee fees?

Trustee compensation is usually determined by the trustee’s level of experience and the size and complexity of the trust.

Trustee fees Type of trustee
Percentage of trust assets Corporate – trust company
Hourly rate Professional – lawyer
Fixed amount Private – friend or family

With a high-value trust or a complex trust with a variety of assets, the grantor may appoint an institution or company to manage it. These corporate trustees can charge an annual fee of 0.5% to 2% of the trust’s assets, in addition to requiring a minimum. For example, if the trust is worth $2 million, the trustee would receive $20,000 compensation that year.

Fees for managing smaller trusts aren’t calculated by percentage because it could eat up a lot of the trust funds. For example, a 1% fee for a trust that holds $100,000 would be $1,000 annually, and if the trust isn’t producing income then paying the trustee that much a year could make operating the trust unfeasible.

For a smaller trust, you can hire a professional like a lawyer who may charge an hourly rate. Many people opt for a non-professional trustee (like an adult child who isn’t an attorney) if they have a simple trust only meant to pass along an inheritance. Since they may not have many duties beyond distributing assets to beneficiaries, a non-professional trustee may receive a smaller fixed fee, but it is ultimately up to the discretion of the grantor.

What are the trustee’s expenses?

Before the trustee is officially recognized as such and has access to the trust funds, the trustee may end up covering some of the trust’s expenses — like property management fees or insurance with their own money. The trustee will be reimbursed for these out-of-pocket expenses, which can also extend to other costs related to managing the trust, like travel expenses or office supplies.

When and how is the trustee paid?

The trustee receives compensation from the trust assets, and not the grantor directly. Trustees might be paid on an annual, biannual, or even quarterly basis, and it could depend on the accounting schedule. It’s part of the trustee’s job to keep a log of their hours managing the trust and a thorough accounting of the trust’s activities.

Learn more about when the trustee can withdraw money from the trust.

When the court determines trustee fees

The trustor, or person who creates the trust, should specify the fees in the terms of trust agreement. However, it’s possible that the trustor forgets to designate the fee, or they indicate that the trustee should receive “reasonable compensation.” In this case, the court can step in to determine the trustee fees, including what’s considered reasonable, which may be based on the following:

  • The gross value of trust’s assets

  • Transactions associated with moving funds in and out of the trust

  • How much time was devoted to performing trust duties

  • Whether the trustee met the goals of the trust (like distributing assets or growing investments as specified by the trust document)

  • State and local law

 Here are a few other instances when the court can get involved:

There is a dispute

Beneficiaries can petition the court if they are dissatisfied with the trustee’s job and believe that the trustee has failed to follow its terms. The court may reassess and reduce the trustee’s compensation, and if the trustee misused or even stole the funds the beneficiary has the right to sue for losses.

Learn more about the rights of a trust beneficiary.

The trustee does extra work

Trustees can petition the court if they feel that they have performed difficult work beyond routine management or what’s laid out in the trust. They may be able to receive greater compensation (“extraordinary fees”) for handling “extraordinary work,” which includes handling litigation or business transactions, and they must provide records for the court.

Trustee compensation and taxes

If you’re a trustee, you will have to pay income tax on any fees you are paid for your services. Trustees that are beneficiaries can choose to waive their compensation. A parent may open a revocable living trust to pass along an inheritance to their child and name the child as the successor trustee to take over managing the trust when they die. Receiving assets as an inheritance may not require any taxes to be paid, depending on the structure of the trust.

Read more related articles here:

 Trustee Compensation

The 2021 Florida Statutes-Trustee Compensation

Also, read one of our previous Blogs at:

Successor Trustee: Duties, Powers and More

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

Estate Battle with Millions at Stake in New Orleans

Estate Battle with Millions at Stake in New Orleans

Jessica Fussell Brandt filed an eviction petition against her daughter, Julie Hartline, her son-in-law Darryl Hartline and two grandchildren, Alexis and Zachary Hartline. She is pitted against them in a legal fight over an estate valued at more than $300 million, reports nola.com in the article “In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound.”

Before auto magnate Ray Brandt died at age 72 from pancreatic cancer, the entire family shared a compound that includes two mansions located next to the Metairie Country Club. Brandt has been trying to sell the property which belongs to the estate, as its executrix. The family members living there don’t want to move, even taking down “For Sale” signs from the lawn.

Her attempt to evict them comes after she won a case in her attempt to maintain control of her late husband’s estate, which includes a large number of auto dealerships and collision centers across Louisiana and Mississippi.

On January 25, a Jefferson Parish judge invalidated the last will and testament that Ray Brandt signed just weeks before his death and another last will drafted in 2015. The district judge ruled that both last wills contained a flaw in how they were notarized: neither notarization specified that Ray Brandt, the witnesses, and the notary were together when it was signed.

The decision is being appealed, but it appears to leave the fate of Brandt’s empire to a last will he made in 2010. Unlike the others, this last will places Jessica Brandt in full control of his estate and trust, including the auto dealerships, until her death.

Ultimately, Ray Brandt directed that her grandchildren, who he legally adopted as adults before he died, would split the estate’s assets.

Despite issuing a statement saying that Jessica was “pleased with the prospect beginning the healing process,” after the Jefferson Parish decision, the eviction filing revealed that Jessica’s attorneys sent an email urging family members to leave the property by January 31, 2021.

Jessica made a statement that her wish to evict family members was a result of the multiple citations issued by Jefferson Parish for continuing violations at the compound. The latest one was for a trailer and mud buggy parked in a driveway on a vacant lot. She also said that the family members own two other homes, one in Metairie and one in Fort Beauregard.

The compound where the family settled seven years ago is estimated to be worth more than $8 million.

The heart of the dispute pits Jessica Brandt against Archbishop Rummel High School principal Marc Milano, who Ray Brandt named as a trustee to oversee the auto group and the rest of the estate until Jessica Brandt dies. Milano has accused Jessica of taking money from the estate and trying to claim an ownership interest in the dealership. She sued him for defamation.

Now the grandchildren have filed their own legal action, challenging a petition to put Ray Brandt’s last will into effect. Their argument is the trust that Ray Brandt set up in 2015 makes it clear that he meant for Milano to oversee the assets.

This estate battle will no doubt keep the Jefferson Parish courts and newspapers busy for some time. It’s a lesson to keep your family’s business private, by ensuring that your estate plan is properly prepared and up to date.

Reference: nola.com (Feb. 3, 2021) “In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound”

Read more related articles at:

Fate of Ray Brandt’s auto empire in doubt amid roiling family squabble over estate

‘Stop all of this!’ Ray Brandt’s widow bemoans the family battle over his massive estate

In Ray Brandt estate battle, widow tries to evict family from Old Metairie compound

Also, read one of our previous Blogs at:

Celebrity Estates: Battle Over Inheritances

Click here to check out our On Demand Video about Estate Planning.

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