I am often amused by the advertisements and offers I see about
living trusts.
Almost always, one of the great selling points is how a
the trust will save thousands of dollars in “nasty” legalization fees.
This leads the consumer to believe that you pay for the estate,
but living trusts are “fr*e”. (i.e. after paying the
forwarder to set one up for you).
not so
Here is an email I received from one of my subscribers.
(she has given me permission to discuss her question at this
Article):
hi Phil,
My mom recently passed away and my sister is the first administrator.
He says he receives 10% of my mother’s estate as the first trustee.
Is this true? What is the normal fee for the first trustee?
Big question. Often one of the largest, if not the largest,
areas of dispute between children or heirs after a death occurs.
What is a trustee fee? How is it calculated? There’s others
Rate?
If you have a trust and don’t know the answers to these questions,
I think the correct thought is “Uh-ohh!”
Okay, let’s do a quick review of trustees’ fees.
Let us first make a distinction between the times that a sindico can
be called to act.
Remember, one of the best uses of a trust is to manage the
property of someone who is disabled. my best friend and
her sister have been handling her mother’s affairs (such as
trustees) for the past 10 years. Mom is 95 years old, in a decent physique.
health, but has advanced Alzheimer’s).
Let us leave the discussion of trustees’ fees charged by
manage the estate of an incompetent for a future item. we go
get down to work to answer the previous question.
Here it is again:
hi Phil,
My mom recently passed away and my sister is the first administrator.
He says he receives 10% of my mother’s estate as the first trustee.
Is this true? What is the normal fee for the first trustee?
Basically, the question is “How much can a trustee charge a
handle an inheritance after a death?”
How do we respond to this?
First, we have to look at the trust instrument.
Most competently issued trust instruments will have a section
which deals with the trustee’s fees.
The best ones are quite specific and make a distinction.
between acting as trustee while the beneficiary is alive, but
incompetent, and acting as trustee after a death has occurred
(Actions similar to those carried out by an executor through a succession).
So first, we look at the trust instrument. It will often be specified
a fee. Sometimes it will say .75% to 1.25% of the total value
of the assets that are managed and transferred (since this is the
typical fee charged by professional trust companies managed by
many banks).
In fact, let’s see what California law tells us about trustees’ fees.
(each state will have a statute, go to your county law library
and ask the law librarian to help you look it up).
In California, the law of living trusts is contained in the
Inheritance Code. This is what the Probate Code, Sections 15680-82, tells us:
15680. (a) Subject to subdivision (b), if the trust instrument
provides for compensation of the trustee, the trustee is entitled
to be compensated in accordance with the trust instrument.
(b) Upon adequate showing, the court may fix or allow a higher
or less compensation than might be allowed under the terms of the
confidence in any of the following circumstances:
(1) When the duties of the trustee are substantially
different from those contemplated when the trust was created.
(2) When the compensation according to the terms
of the trust would be unfairly or unreasonably low or high.
(3) In extraordinary circumstances requiring equity
relief.
(c) An order fixing or allowing more or less compensation
under subsection (b) applies only prospectively to actions taken in
administration of the trust after the order is made.
15681. If the trust instrument does not specify the trustee
compensation, the trustee is entitled to reasonable compensation
under the circumstances.
So, to answer the question, we have to find out what is the trust
says the instrument. If it is silent, then Section 15681 tells us the
compensation must be “reasonable compensation under the
circumstances.”
What is reasonable under the circumstances? If it were me,
I would collect the brochures from the various bank trusts
departments in the area to determine their rates. Where
live, the fee is .75% to 1.20%, depending on the size of the
trust and the type of assets. The minimum is $5,000.
So it seems that the answer to the question is that if the
the trust instrument says that the first trustee is entitled to 10%
compensation, then she can be. However, if not, then the
the amount to be collected must be reasonable.
And, even if the trust instrument said 10%, seriously
consider asking a court to change compensation for
15680(b)(2) allowing the court to change compensation
“When the compensation according to the terms of the trust
would be unfairly or unreasonably low or high.
This article must continue as we haven’t even
referred to the great m*ney m*ker for trustees and lawyers,
“extraordinary fees”.
Good luck and until next time,
phil craig
PS Feel free to forward this to your friends.
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http://www.LivingTrustSecrets.com
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