Trustee Fees: How Much Is Enough and How Much Is Too Much?
I am often amused by the ads and offers I see on
living trusts.
Almost always, one of the great selling points is how a
the trust will save thousands of dollars in “nasty” probate fees.
This leads the consumer to believe that you pay for the estate,
but living trusts are “fr*e”. (that is, after you have paid the
forwarder to set one up for you).
Not so.
Here is an email I received from one of my subscribers.
(she has given me permission to discuss her question on this
Article):
hi phil,
My mom recently passed away and my sister is the first admin.
He says he gets 10% of my mother’s estate as the first trustee.
Is this true? What is the normal fee for the first trustee?
Big question. Often one of the largest, if not the largest,
areas of dispute between children or heirs after a death occurs.
What is a trustee fee? How is it calculated? There’s others
Rate?
If you have a trust and don’t know the answer to these questions,
I think the correct thought is “Uh-ohh!”
Okay, let’s do a quick review of trustee fees.
First let us make a distinction between the times that a trustee can
be called to act.
Remember, one of the best uses of a trust is to manage the
property of someone who is disabled. my best friend and
her sister have been handling her mother’s affairs (as
trustees) for the last 10 years. Mom is 95 years old, in a decent physique.
healthy, but has advanced Alzheimer’s).
Let us leave the discussion of trustee fees charged by
manage the estate of an incompetent for a future article. we go
Get down to work to answer the previous question.
Here it is again:
hi phil,
My mom recently passed away and my sister is the first admin.
He says he gets 10% of my mother’s estate as the first trustee.
Is this true? What is the normal fee for the first trustee?
Basically, the question is “How much can a trustee charge a
handle an inheritance after a death?
How do we respond to this?
First, we have to look at the trust instrument.
Most competently issued trust instruments will have a section
which handles the trustee’s fees.
The best ones are quite specific and make a distinction.
between acting as trustee while the beneficiary is alive, but
incompetent, and acting as a receiver after a death has occurred
(actions similar to those carried out by an executor through a succession).
So first, we look at the trust instrument. will often specify
a fee. Sometimes it will say .75% to 1.25% of the total value
of the assets that are managed and transferred (since this is the
typical fee charged by professional trust companies managed by
many banks).
In fact, let’s see what California law tells us about trustee fees.
(each state will have a statute, go to your county law library
and ask the law librarian to help you look it up.)
In California, the law for living trusts is contained in the
Inheritance Code. This is what the Probate Code, Sections 15680-82 tells us:
15680. (a) Subject to subdivision (b), if the trust instrument
provides for compensation of the trustee, the trustee is entitled
to be compensated in accordance with the trust instrument.
(b) Upon proper showing, the court may fix or permit a higher
or less compensation than might be allowed under the terms of the
trust in any of the following circumstances:
(1) When the duties of the trustee are substantially
different from those contemplated when the trust was created.
(2) When compensation in accordance with the terms
of the trust would be unfairly or unreasonably low or high.
(3) In extraordinary circumstances requiring equity
relief.
(c) An order fixing or permitting more or less compensation
under subdivision (b) applies only prospectively to actions taken in
administration of the trust after the order is made.
15681. If the trust instrument does not specify the trustee
compensation, the trustee is entitled to reasonable compensation
under the circumstances.
So, to answer the question, we have to find out what is the trust
says the instrument. If it is silent, then Section 15681 tells us the
compensation must be “reasonable compensation under the
circumstances.”
What is reasonable given the circumstances? If it were me,
I would collect the brochures of the various bank trusts
area departments to determine their rates. Where
live, the fee is .75% to 1.20%, depending on the size of the
trust and the type of assets. The minimum is $5,000.
So it seems that the answer to the question is that if the
the trust instrument says that the first trustee is entitled to 10%
compensation, then she can be. However, if it is not, then the
the amount receivable must be reasonable.
And, even if the trust instrument said 10%, seriously
consider asking a court to change the compensation for
15680(b)(2) allowing court to change compensation
“When compensation in accordance with the terms of the trust
would be inequitably or unreasonably low or high”.
This article must continue as we haven’t even
referred to the big m*ney m*ker for trustees and lawyers,
“extraordinary fees”.
Good luck and until next time,
phil craig
PS Feel free to forward this to your friends.
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http://www.LivingTrustSecrets.com
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