Setting Trustee Fees in Your Trust

When setting up a trust, one important decision to make is how much the trustee should be paid. A trustee has a huge responsibility in managing a trust, including overseeing assets, distributing funds, and ensuring the trust operates according to the trustor’s wishes.  Thus, it’s only fair that a trustee be paid for their work.  But how is a trustee compensated for this responsibility and how should you decide the amount? This article provides Jacksonville residents a guide for setting trustee fees in their trust or deciding a fair and reasonable payment to give the trustee if the trust document does not specify it.

In his video, “How Much Should a Trustee be Compensated?,” Jacksonville Trusts Attorney Bill O’Leary explains the parameters of the trustee duties and the Florida rules that dictate what trustees should be paid.

What Does a Trustee Do?

A trustee has a range of duties, from simple tasks to more complex responsibilities. These can include:

• Managing trust assets, such as real estate or investments
• Making distributions to beneficiaries
• Filing taxes for the trust
• Keeping financial records and preparing reports

Given the workload and responsibility, trustees are generally entitled to compensation for their services. The complexity of the trust often determines the extent of the trustee’s duties, which can vary widely from one trust to another. Based on the list of fiscal responsibilities, choosing a trustee who has the right skill set to properly and effectively manage the trust’s assets is important.  Read more in our article, How to Choose the Right Trustee for Your Estate Plan

How Are Trustee Fees Determined?

Compensation Specified in the Trust

When drafted properly with a Jacksonville trust and estate attorney, the trust document itself may provide clear instructions on how much the trustee should be paid. Some trust agreements include a fixed rate, hourly compensation, or a percentage of the trust’s assets. If the trust spells out compensation, that figure is typically followed unless there’s a dispute.

What Happens if the Trust Doesn’t Specify Compensation?

In many cases, trust documents do not specify how much a trustee should be paid. When this happens, the law in Florida and many other states entitles trustees to “reasonable compensation.” What qualifies as “reasonable” can vary depending on factors such as:

• The complexity of the trust and its assets
• The number of beneficiaries involved
• The time required to administer the trust

A Jacksonville trust attorney can help you both determine the proper fee schedule for a trustee or serve as a professional reference for the trustee to ensure they follow their fiduciary duties correctly.

What is a Reasonable Trustee Fee?

The amount considered reasonable for the duties of trust administration often depends on the type of trustee and their level of training, and whether the trustee is a third-party professional or a family member or friend appointed to the position in the trust document.

Professional Trustees

When a bank, trust lawyer, or other professional serves as a trustee, they are usually compensated at a rate of 1-2% of the value of the total trust assets. For example, if a trust holds $1 million, the trustee might earn between $10,000 and $20,000 annually. Professional trustees might charge a higher percentage for smaller trusts, where the workload is the same regardless of asset size.

Non-Professional Trustees

Family members or friends who act as trustees often charge less than professionals. However, their fees can still be significant, particularly if they are handling complex tasks like managing investments or preparing detailed financial reports. In these cases, non-professional trustees might charge a rate similar to professional trustees.

For simpler tasks, such as distributing assets after the trustor’s death, family or friends might even serve as trustees without charging a fee, especially if their responsibilities are minimal.

Additional Costs and Expenses

In addition to compensation, trustees are entitled to reimbursement for any out-of-pocket expenses they incur while managing the trust. These expenses could include:

• Travel costs
• Legal fees
• Tax filings
• Storage fees for assets

These reimbursements ensure that trustees are not personally covering costs related to their duties. For some types of trusts, like special needs trusts, additional expenses and duties may arise in managing the relationship and financial needs of the special needs beneficiary.

Disputes Over Trustee Fees

Both beneficiaries and trustees have the right to challenge compensation if they feel it is unfair. Beneficiaries can dispute fees if they believe the trustee is being overpaid, while trustees can ask a court to approve a higher fee if they believe their work was more demanding than expected.

How Does a Trustee Gets Paid?

The trustee’s compensation comes directly from the trust assets. Payments can be made annually, biannually, or even quarterly, depending on the trust’s financial structure. Trustees are responsible for keeping detailed records of their work and hours spent managing the trust to support their compensation claims. Jacksonville residents are encouraged to read more in our article, How Much Should A Trustee Be Compensated?  and  What Is a Fiduciary and a Fiduciary Duty?

Key Considerations for Trustee Compensation

Several factors should be considered when deciding on trustee compensation:

• Trust Size: Larger trusts might require more time and expertise to manage, warranting higher compensation.
• Trust Complexity: Complex trusts, such as those with varied assets like real estate and investments, may require professional management and higher fees.
• Number of Beneficiaries: The more beneficiaries involved, the more work is required to manage distributions, which can affect compensation.

Work with a Jacksonville Trust Attorney to Properly Set Trustee Fees

Determining how much a trustee should be paid involves balancing fairness with the trust’s resources and the trustee’s workload. Whether you are creating a trust or serving as a trustee, it’s important to ensure that compensation is reasonable and in line with the trust’s complexity.

Working with a Jacksonville trust attorney is crucial to ensure your trust is properly drafted and include clear details about trustee fees. If you’d like to learn more about trustee compensation or how we can help, schedule a free 15-minute Discovery Call with us to start the conversation and make the process easy and stress-free.