How Much Should Trustee of Large Trusts Charge as a Reasonable Fee?
I am a trustee of three trusts each holding $8 million dollars. The investment manager who disburses the fees does not send 1099’s. What is a reasonable monthly fee and are these fees taxable?
I don’t understand why you’re not receiving 1099s. I assume they go to the accountant for the trust and that the trust is filing the annual income tax returns.
Trustee fees should reflect a number of factors, including the amount of work involved, the size of the trust fund, and other costs the trust might incur. For larger trusts such as these, the overall costs should be less than 1.0% per year, or $80,000 for each trust. I don’t know what the investment manager is charging. But it would not be inappropriate for you to charge the difference. So, for instance, if the investment manager is charging 75 basis points, or $60,000 a year, then you could charge $20,000. If all the trusts are being managed the same, then there’s a strong argument that both the investment manager’s fee and your fee should be substantially less, since there’s not much more work to manage a $24 million trust over what’s necessary for one holding $8 million. Then, perhaps, the overall fee should be closer to 0.5%.
Yes, this is taxable income because it’s earned by you working as trustee.