Should Trustee-Beneficiaries Take Trustee Fees?
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Question:
My sister and I are co-trustees of our parents’ trust, who are both now deceased. Are the administrative fees, which we both want to collect, considered separate from the trust?
Response:
I take it that you’re not the sole beneficiaries, which is why you would want to collect your fees. So, for instance, if the trust held $200,000 and there were four equal beneficiaries, each would receive $50,000 in distribution. If, instead, you and your sister were each entitled to $4,000 in fees, after payment to you, the trust would then have $192,000 remaining, and each beneficiary would receive $48,000 in distribution. You and your sister would receive $52,000 in total, $4,000 in fees and $48,000 as your share of the trust.
However, remember that the fees would be earned income and have to be reported on your tax returns, so you would each net something less than $52,000 after taxes, perhaps not so much more than the $50,000 you would receive if you did not take any fees, depending on your tax brackets and the state taxes where you reside.
Related Articles:
How Should Trustee Fees be Reported on Trust Income Tax Returns?
What is the Tax Treatment of Trustee Fees?
When are Trustee Fees Paid?
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