Often family members and friends serve as trustees without compensation. If their duties are modest — simply distributing trust assets, for example — that might be fine.
With a more complicated trust, however, some compensation is expected. Professionals usually charge an annual fee of between 1 percent to 2 percent of assets in the trust. So, for example, the annual fee for a trust holding $1 million could be between $10,000 and $20,000. Often, professionals charge a higher percentage of smaller trusts and a lower percentage of larger trusts.
A non-professional trustee usually charges less than a professional. However, if the non-professional trustee is doing all of the work for a trust, including investments, distributions and accounting, it may be appropriate to charge a similar fee. On the other hand, if the non-professional trustee is paying others to perform these functions or is acting as co-trustee with a professional trustee, charging this much may be seen as inappropriate. A typical fee might be a quarter of what the professional trustee charges, or .25 percent (often referred to by financial professionals as 25 basis points). If taking a percentage of the trust assets would deplete the trust, non-professional trustees may also charge an hourly rate for their work.
In addition to compensation for their work, trustees are also entitled to reimbursement for any expenses that they might incur in the course of performing their duties, including travel, storage, insurance, or taxes.
If the beneficiaries are unhappy with the fees the trustee receives, they can challenge them in court. And if trustees think they are entitled to more compensation, they can also appeal to court to receive higher payment.
Whether you are setting up a trust or have been appointed trustee and want to know what fees are reasonable, consult with an estate planning attorney.
