Understanding Trustee Fees: What You Need to Know
When setting up a trust, one key element to consider is the compensation for the trustee whether it’s after your death or during your incapacity. A trustee manages the trust’s assets and ensures everything is handled according to your wishes. But this role comes with responsibilities and work, which is why trustee compensation is an important topic.
What is a Trustee?
A trustee is a person or entity responsible for managing your trust’s assets. They act on your behalf and execute on your wishes according to the trust’s terms. This role is crucial, and it can be demanding. You might choose a family member, a friend, or even a professional such as a bank or trust company to take on this role.
Why Trustee Compensation Matters
Being a trustee involves a lot of work, and it’s important to consider compensation for their time and effort. Most trusts include a provision detailing whether the trustee will be compensated, and if so, how much and in what manner.
Here’s what you should know about trustee compensation:
- Provision in Your Trust: Check your trust documents to see if there’s a provision for trustee compensation. This clause outlines whether the trustee will receive payment and, if so, how it will be determined. It could specify an hourly rate, a flat fee, or “reasonable” compensation based on what’s deemed fair by a judge.
- Family vs. Professional Trustees: Often, family members serving as trustees may choose to waive compensation out of goodwill. On the other hand, professional trustees, such as banks or professional fiduciaries typically charge for their services. Ensure that the compensation structure aligns with the type of trustee you select.
- Fair Compensation: If you’re hiring a professional trustee, their fees should be reasonable and reflect their role as a trustee, not as a specialized professional like an attorney or accountant. Overcharging can be avoided by clearly defining their compensation limits in the trust document.
Reviewing Your Trust
It’s essential to review the compensation provisions in your trust to ensure they meet your expectations and are fair. If you’re unsure about the details or need help understanding the provisions, consulting with a legal expert can provide clarity.
Feel free to reach out to our office if you’d like a review of your trust documents or have any questions about trustee compensation. We’re here to help you ensure that your trust works smoothly and according to your wishes.
