As both your estate and your family grow, so will your estate plan through the addition of estate planning tools and strategies that can help accomplish additional goals. One of the most common of those additional tools is a trust agreement. If you create a trust, someone must administer that trust. The Los Angeles trust attorneys at Schomer Law Group, APC discuss the issue of Trustee compensation for anyone considering the addition of a trust to their estate plan.
What Does a Trustee Do?
To truly appreciate why a Trustee is entitled to a fee, you need to have a firm understanding of the duties and responsibilities a Trustee undertakes when administering a trust. The overall job of a Trustee is to manage trust assets and administer the trust. Specifically, however, a Trustee may be required to do many things, including:
- Manage and protect trust assets.
- Abide by the trust terms unless they are impossible, illegal, or unconscionable.
- Invest trust funds using the “Prudent Investor Standard”.
- Monitor trust investments.
- Communicate with trust beneficiaries.
- Resolve conflicts among beneficiaries.
- Make discretionary decisions.
- Distribute trust funds to beneficiaries.
- Approve or deny distributions if given discretionary authority.
- Keep trust records.
- Prepare and pay trust taxes.
How Much Does the Trustee Get Paid?
Among the many factors to consider when you are creating your trust are the costs associated with administering your trust because those costs are paid out of the trust assets. As you can see, the Trustee of a trust often has a time-consuming and complex job to do – and how well the Trustee performs that job will have a direct bearing on the success of the trust. Not only should that encourage you to appoint the right person for the job, but it should also be considered when funding your trust.
The trust agreement dictates how the Trustee’s fee will be paid. If the Trustee is a professional, such as a lawyer or a C.P.A., the trust agreement may direct the Trustee to be paid his/her normal hourly fee for administering the trust, a set salary, or may earn a percentage of the value of the trust assets. For a professional Trustee, a typical fee is between 1.0 and 1.5 percent of the value of the trust assets per year. They may also receive a small percentage of the trust income each year. If the Trustee is a non-professional, the fee tends to be lower (0.5-1.0 percent) because the trust will usually incur additional professional fees. Generally, if the Trustee is also investing the trust assets, the percentage will be higher than if the Trustee is simply managing and distributing the assets.
Frequently, however, a trust agreement is silent on the issue of Trustee fees, or the trust agreement calls for the Trustee to be paid a “reasonable fee” for his/her services. When that is the case, the best way to approach the Trustee fees is through an agreement with the trust beneficiaries when possible. If the beneficiaries are minors or are otherwise unable to consent to a fee, the Trustee must determine his/her own salary which could be subject to judicial review if challenged.
Contact Los Angeles Trust Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about Trustee compensation, or adding a trust to your estate plan, contact the experienced Los Angeles trust attorneys at Schomer Law Group APC by calling (310) 337-7696 to schedule an appointment.
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