How Much are Trustee Fees for a Larger Trust?
My parents have a living trust. What is the trustee fee for an estate worth between $5 and $10 million dollars, where I have an account split between the two trusts and I did all the paperwork?
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Professional trustees generally charge an annual fee based on the amount of funds in the trust. Typically, this is between 0.8% and 1.2% of the funds under management for the first $2 million and then becomes a smaller percentage on amounts above $2 million. Though not all trust companies post their fee schedules online, here’s one from Edward Jones:
SCHEDULE OF ACCOUNT FEES
Annual Base Charge Trustee or Co-trustee: $1,200
Managing Agent: $600
Fee schedules for various other companies can be found in this Wealth Advisor article, published in August 2019.
In my experience, banks and trust companies are also willing to negotiate fees on larger trusts since they are generally more profitable to run than smaller trusts. It doesn’t take that much more work manage a $5 million trust than a $500,000 trust. While the investments will undoubtedly be more complicated, the client contact and communication may be the same.
What is the Tax Treatment of Trustee Fees?
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Hi Harry, My brother and I are co-trustees of our fathers estate worth about $60 million. The estate is 95% made up of commercial real estate. We have property managers but do inspection and consult with them on a regular basis regarding everything. Our mother gets the income from the trust and children, and future generations get the assets passed on to them. Currently we split a 6% fee on the income produced which comes to around $250k per year which we split. This arrangement was set up by our father. Now that he has passed what would be an appropriate amount for us to charge. If we were to keep the 6% of income fee for dealing with the properties could we also charge say .5% of the value of the trust for running the trust in general. If we do this then the 6% fee would come straight from the income reducing our mothers monthly income and the .5% would come from the principle of the trust? Thanks
I think either approach is fine as long as everyone is in agreement. Either way, you and your brother must treat the distribution as taxable income. Of course, if your trustee fees do not reduce the distribution to your mother, they will reduce the corpus by 0.5% per year. I can’t say whether your family would be better off in terms of taxes if these funds ended up in the trust or in your mother’s estate. I’d recommend consulting with your local trust and tax counsel on all of this. They could also let you know whether there are any state-specific rules around trustee fees.