When are Trustee Fees Paid?

 In Revocable Trusts, Trustee

Question:

When are trustee fees normally paid? (i.e. end of year, beginning of year, prorated monthly?)

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Response:

There’s no hard and fast rule, but often trustee fees are paid semiannually. For instance, if the fee is 1 percent of the assets in the trust, it might be paid half on January 1st based on the December 31st value and half on July 1st based on the June 30th value. If the end of year value of all the assets in the trust was $500,000, the trustee would receive $2,500 at that time. If the value increased to $550,000 on June 30th, then the next payment would be $2,750.

 

Related Articles:

How Much are Trustee Fees for a Larger Trust?

What is the Tax Treatment of Trustee Fees?

Can a Neglectful Trustee be Denied his Fees?

What Will an Institutional Trustee Charge for Closing our Trust?

Is My Trustee Overcharging?

Showing 7 comments
  • Dave
    Reply

    I have managed a trust for 7 years and I am preparing to liquidate the assets and ensure the benefactor receives his inheritance. The liquid assets are $950,000. In the trust, it states that I should be paid but does not state the amount. Your thoughts?

      • Harry Margolis
        Reply

        Dave,
        While I can’t be definite without seeing the trust itself, I’d be inclined to think that all of the named beneficiaries should receive an equal share. Would you be able to share the actual language of the trust regarding distributions?
        Harry

          • Dave
            Reply

            There is only one beneficiary. He will receive everything minus whatever I am paid. I am not sure what I should charge. I was responsible for ensuring all bills were paid including the live in nurses.

        • Sarah
          Reply

          Harry, I began acting as successor trustee for my Grandfather’s living revocable trust as of May. Compensation language is pretty standard (average rate of professional corporate trustees, plus mileage and other travel expenses). I am not an attorney or tax professional and what I can gather is anywhere between 0.25 and 1.5% annually of the total trust assets. Is that reasonable? Also, how would I pay myself from his trust, if I am the POA? Thank you for your help and advice.

            • Harry Margolis
              Reply

              Dear Sarah,
              You can pay yourself as trustee. It’s hard to say what the appropriate fee should be not knowing the size of the trust or your actual duties. Certainly anywhere from 0.25% for a larger trust to 1.5% annually for a smaller trust would be within the range. However, if you are also paying someone else for investment management, that should be factored in. The best approach would be to discuss it with the parties at interest, the beneficiaries, and agree on a reasonable fee. If they accept the fee schedule in advance, then they can’t very well question it down the road.

            • Kimberly Goodman
              Reply

              In addition to the bank accounts/financial assets (apprx 620k) in my parents trust, which are to be divided equally between the 4 of us- the trust also includes a life estate for my middle sister (who lived with & cared for my parents for many years) allowing her to continue to live in my parents (trust owned) home. The trust does not specify how the trustee (an attorney) is to be paid, other than the general wording you mention. My brothers think my sister should have to pay the ongoing fees associated with the life estate from her portion of the financial assets she receives or she should buy the house with them.
              My sister feels that the fees should be estimated and set aside before the financial assets are divided out, or that she should be named trustee of her own life estate so there is no need for additional payments to a trustee.
              I just want to do whatever is most fair and/or customary in this situation.

              What resolutions are available to my siblings and I?

                • Harry Margolis
                  Reply

                  When only real estate is held in trust, coming up with funds to pay the trustee can be difficult unless the property is producing rental income. I like two of the solutions you suggest and dislike two. I think it makes sense for your sister to pay the trustee a reasonable fee or for her to serve as trustee, as long as the other three are comfortable with her serving in that role. I don’t think it’s fair to ask your sister to buy the house from the trust because that would deny her the benefit your parents intended that she receive. On the other side, it doesn’t seem totally fair that everyone participate in paying the trustee’s fee when your sister gets most of the benefit of the trust during her life. On the other hand, it’s also not totally unfair for everyone to contribute since the rest of the family gets the benefit of the trustee watching out for their future interest.

                  Here are two other possible solutions: If you’re not all comfortable with your sister serving as trustee, what about her serving as co-trustee with another sibling? To the extent this puts an unfair responsibility on that sibling, you could agree to rotate in and out of this role every five years. Another solution would be for your sister to buy you all out, but the buy out would be based on the value of your remainder interest — your right to receive the property upon your sister’s death. The IRS provides tables for this valuation based on your sister’s age and life expectancy, the older she is, the shorter her life expectancy, and thus the greater the value of your remainder interest.

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