Can I Charge a Management Fee for Property in Trust When I’m the Trustee?
I have been trustee of my father’s trust since 12-24-18 to present. I have taken care of contacting all companies, paying bills, remodeling and repairing, banking, etc. The house is rented out and I do not hire a management company. I take care of everything involved. 1) Can I charge a monthly fee for this since I don’t hire a property management company. 2) Along with the standard duties of an executor, my brother sued me and we are in litigation since September 2019 to present. How much of an executor fee can I collect and can I include the time I spent in litigation as extraordinary. He just won a motion saying I cannot use trust fees to pay for the defense and I want to counteract that since I have never taken a fee.
To answer your first question, yes, you are entitled to a fee both for serving as executor and for property management. How much is always difficult to determine. Professional trustees typically charge annually 1.0% to 1.2% of the property in the trust, though this can vary depending on the circumstances and the size of the trust. Professional property management companies typically charge 10% of rent collected but, again, this can vary depending on the circumstances. A question that always arises when a family member trustee or property manager seeks compensation at the level of professionals who fill these roles is why not hire a professional if it’s going to cost just as much. Also, clearly there’s something of a conflict of interest if you get compensated for both roles. As trustee, can you really say that you are the best property manager available? Perhaps you are if you’re not charging, but not if you’re charging as much as any other property manager. In short, you’re entitled to a fee but probably not as much as professionals in these roles.
Your second set of questions are much more difficult to answer. A lot may depend on who ultimately wins the litigation. If the court finds that your brother’s claims have merit, your charging a fee for fighting those claims could hurt your case rather than help it. If it finds that your brother’s claims do not have merit, then it may support your fee being based in part on the time it’s taking you to deal with the litigation. So you may want to wait to charge a fee until the litigation is complete. In any case, this is so tied up with the litigation and your litigation strategy that I would refer you back to your counsel to advise you on what makes the most sense for your case.
Don’t know how your trust works?
Whether you’re creating a plan, managing a trust, or are a beneficiary of a trust, this book is your easy-to-read roadmap.