Living Trust Administration Compensation

By Wayne Thomas

Managing a living trust can be hard work. The person appointed to handle this administrative role, referred to as the trustee, has several basic responsibilities, including safeguarding the trust property, making prudent investments and providing proper accounting and record keeping. For that reason, a trustee is generally entitled to an agreed upon fee or "reasonable" compensation for his services.

Managing a living trust can be hard work. The person appointed to handle this administrative role, referred to as the trustee, has several basic responsibilities, including safeguarding the trust property, making prudent investments and providing proper accounting and record keeping. For that reason, a trustee is generally entitled to an agreed upon fee or "reasonable" compensation for his services.

Agreed Upon Compensation

A living trust is a legal arrangement which involves managing property for the benefit of those named in a written trust instrument. The person appointed to serve as trustee must follow all of the trust-maker's instructions, placing the interests of the beneficiaries first and always acting with the highest level of care and loyalty. It is common for the trust instrument or a separate agreement to contain a provision regarding compensation for the trustee's services, which might be in the form of hourly fees or a flat dollar amount.

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Modification

If the trust-maker later determines that the compensation provided to the trustee is either too high or low, he may modify the trust instrument and change the fee if the trust is "revocable." If the trust is irrevocable or the trust-maker has since died or become incapacitated, typically the level of compensation can still be changed if the trustee and all of the beneficiaries agree. However, if the beneficiaries are either incapacitated or minors, state law generally requires court approval of the modification.

No Compensation Provision

If the trust instrument is completely silent regarding compensation for the trustee, most states allow the trustee or beneficiaries to petition the court to set the fee according to state law. Although states can vary, it is common for the default rule to be an amount proportional to the value of estate assets. For instance, an example might be a 1.75% annual fee for the first $500,000, 1% annual fee on the next $1,000,000, and 0.5% annual fee on any amounts over $5,000,000.

Reasonable Fee Provision

Sometimes a trust instrument will provide for a reasonable trustee fee, without a specific percentage or dollar amount. In these cases, if the beneficiaries dispute whether the amount taken by the trustee is reasonable, the court can be called upon to set a fixed fee. Although states can vary, judges often look to several factors to determine what is reasonable, including the specific duties undertaken by the trustee, experience he brings to the position, time devoted to performance of his duties, and degree of risk and responsibility assumed by the trustee.

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How Is Compensation Determined for the Trustee of an Irrevocable Trust in Georgia?

References

Related articles

Irrevocable Family Trust Laws in Massachusetts

An irrevocable family trust can be effective estate planning tool. When an individual establishes this type of trust, he appoints an individual, known as a trustee, to oversee the administration of the trust. In Massachusetts, specific rules apply to the trustee. State law also sets forth the limited circumstances for the modification or termination of the trust. Understanding the state laws that apply to irrevocable family trusts will help ensure the proper distribution of property held in the trust.

Trustee Not Paying Beneficiary

A trustee is a party who administers the assets of a trust and distributes them to beneficiaries in compliance with terms established by the trust grantor. Although the terms of a trust often allow a trustee considerable discretion with respect to the distribution of assets to beneficiaries, beneficiaries have legal options if the trustee's refusal to distribute trust assets appears to be unjustified.

Trustee Resignation and Appointment

A trustee's right to resign his position is not absolute. The trustee's resignation must be authorized by the trust document or state law, and a trustee can face civil liability for failing to fulfill his duties under the law. The appointment of a successor trustee is governed by the trust document if it contains such a provision or by state law if it does not.

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