Trustee Fees: How Much is Enough and How Much is Too Much?

I am often amused by the ads and offers I see concerning living trusts.

Almost always, one of the big sales pitches is how a living trust will save th*usands of doll*rs in "nasty" probate fees.

This leads the consumer to believe that you pay for probate, but living trusts are "fr*e." (that is, after you've paid the promoter to set one up for you).

Not so.

Here's an email I received from one of my subscribers (she has given me permission to discuss her question in this article):

Hi Phil, My mom passed away recently and my sister is 1st trustee. She claims she gets 10% of my mom's estate as 1st trustee. Is this true? What is the normal fee for 1st trustee?

Great question. Often one of the biggest, if not the biggest, areas of dispute between children or heirs after a death occurs.

What is a trustee fee? How is it calculated? Are there other fees?

If you have a trust and don't know the answer to these questions, I think the proper thought is "Uh-ohh!"

OK, let's have a quick review of trustee fees.

First let's make a distinction between the times a trustee may be called upon to act.

Remember, one of the best uses of a trust is to manage the assets of someone who is incapacitated. My best friend and his sister have been managing their mother's affairs (as trustees) for the last 10 years. Mom is 95, in decent physical health, but has advanced Alzheimer's).

Let's save the discussion of trustees fees charged for managing an incompetent's estate for a future article. Let's get down to answering the above question.

Here it is again:

Hi Phil, My mom passed away recently and my sister is 1st trustee. She claims she gets 10% of my mom's estate as 1st trustee. Is this true? What is the normal fee for 1st trustee?

Basically, the question is "How much can a trustee charge to handle an estate after a death?"

How do we answer this?

First, we have to look at the trust instrument.

Most competently drawn trust instruments will have a section that deals with trustee fees.

The better ones are fairly 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 (similar actions to what an executor performs through a probate).

So, first, we look to the trust instrument. Often it will specify a fee. Sometimes it will say .75% to 1.25% of the total value of the assets being managed and transferred (since this is the typical fee charged by the professional trust companies run by many banks).

In fact, let's see what California law tells us about trustee fees (every 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 Probate Code. Here is what Probate Code Sections 15680-82 tells us:

15680. (a) Subject to subdivision (b), if the trust instrument provides for the trustee's compensation, the trustee is entitled to be compensated in accordance with the trust instrument.

(b) Upon proper showing, the court may fix or allow greater or lesser compensation than could be allowed under the terms of the trust in any of the following circumstances:

(1) Where the duties of the trustee are substantially different from those contemplated when the trust was created.

(2) Where the compensation in accordance with the terms of the trust would be inequitable or unreasonably low or high.

(3) In extraordinary circumstances calling for equitable relief.

(c) An order fixing or allowing greater or lesser compensation under subdivision (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's compensation, the trustee is entitled to reasonable compensation under the circumstances.

So to answer the question, we have to find out what the trust instrument says. If it is silent, then Section 15681 tells us the compensation is to be "reasonable compensation under the circumstances."

What is reasonable under the circumstances? If it were me, I would gather up the brochures of the various bank trust departments in the area to determine their rates. Where I 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 looks like the answer to the question is that if the trust instrument says the 1st trustee is entitled to 10% compensation, then she may be. However, if it doesn't then the amount to be charged must be reasonable.

And, even if the trust instrument said 10%, I would seriously consider asking a court to change the compensation per 15680 (b) (2) that allows the court to change compensation "Where the compensation in accordance with the terms of the trust would be inequitable or unreasonably low or high."

This article needs to be continued since we haven't even touched on the big m*ney m*ker for trustees and attorneys, "extraordinary fees."

Good luck and until next time,

Phil Craig

P.S. Feel free to forward this on to any friends.

=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=

© Phil Craig, All Rights Reserved

http://www.LivingTrustSecrets.com

=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= -=-=-=-=-=-=-=

Phil Craig is a licensed attorney and entrepreneur. He started practicing law at age 25 in 1979. He does not take on any more clients, but is advisor to some of the biggest names in the internet world. He shares his knowledge gained over the last 25 years at his Living Trust Secrets newsletter site: click here=========>http://www.LivingTrustSecrets.com< /p>

** Attn Ezine editors / Site owners **
Feel free to reprint this article in its entirety in your ezine or on your site so long as you leave all links in place, do not modify the content and include our resource box as listed above.

If you do use the material please send us a note so we can take a look. Thanks.

Financial Planning For Singles

Financial planning often gets a bad rap. Part of the problem is self-inflicted, since some... Read More

How to Save Money for Retirement

Saving money for retirement can be easy or difficult depending on your current salary. If... Read More

Could a Roth IRA be Better Than a 401(k)?

Very few people whom I know are familiar with the benefits of the Roth IRA.... Read More

Build Wealth - Formula To Success

A mole travels one road, according to the way nature intended him; and a squirrel... Read More

A New Economic Policy

Anyone knows that material wealth is measured in goods: apples, cars, shoes, sheep, etc. When... Read More

Learn To Budget

Do you like so many others feel, that even if they are earning well, are... Read More

Simple Tips on Saving

Simple tips on saving can very often make quite a big difference to your finances.... Read More

Wealth And Your Net Worth

Most people know it's important to keep and organize all of your vital financial information.... Read More

Get Rich Doing What Others Dont

"The quickest way to wealthThat I've found to be true;Is to stick out your chestGive... Read More

Q and A: Financial Independence Tips For Women From Coni Cecil

As a woman Netpreneur, I sat down via e-mail with article-announce regular contributor, Internet marketer... Read More

Russ Whitney - Building Wealth Through Real Estate

When Building Wealth by Russ Whitney was released a few years ago it sent shockwaves... Read More

Net Worth Nympho

There are plenty of people who are in love with their bank ... Read More

Financial Freedom for Every Employee

You may think you have to be an entrepreneur to achieve your goal of financial... Read More

You Can`t Cheat An Honest Man

Author: James Walsh ISBN: 1563431696: Publisher: Silver Lake PublishingIn 1903 Charles Ponzi arrived in... Read More

Top 10 Secrets of Getting Rich!

As many people have observed, "Success leaves clues." If you want to achieve extraordinary success... Read More

Discover the Secrets and Possible Solutions To Money Problems

It is sometimes pitful how many projects are never born or die simply because of... Read More

Financial Intelligence - Compounding (The Ninth Wonder of the World)

Compounding: The Ninth Wonder of the WorldBy Nicola Cairncross Compounding is often described as the... Read More

The Morphing of Thought and Cash

Here are some thoughts about the morphing of thought and cash. What do I mean... Read More

Business After The Iraqi War

The rewarding of high compensation packages to top executives who turned over weak quarterly earnings,... Read More

10 Ways to Save $50 Per Month: The Art of Pinching a Penny Until It Screams

1. Save up to 50% per month on convenience cleaner cloths by cutting them into... Read More

The One Important Secret of Making More Money Easily

If you're reading this article, it means you are a person who wants to make... Read More

How Much Do You Need To Earn Per Hour To Achieve Your Yearly Financial Goals

Have you ever asked yourself what your highest income producing activity is?If you're like most... Read More

Can You Be Rich? Part 1

What does becoming rich mean to you? Is it early retirement? Perhaps it is the... Read More

Five Straight Steps to Opening an Offshore Bank Account

Despite what you may have read or heard, anyone is free to open an offshore... Read More

Four Pillars of Creating Wealth

Some people in this world are thinking that their poor financial condition today is their... Read More

Your Own Products Can Make You Rich

Although there are advantages to selling other people`s products and services, there are also drawbacks.... Read More

Starting With Smaller Goals First And Work Your Way Up Until You Achieve Financial Freedom

While you need to have a lot of positive-thought and confidence in order to be... Read More

Mastering Your Money

One of the things most of us have old ideas about is money. The best... Read More

Generate Savings with Smart Use of Electricity!

No matter what income level you are currently at, generating savings is always a smart... Read More

What is Your Creative Retirement Plan?

The idle are a peculiar kind of dead that cannot be buried." Oriental proverbOne thing... Read More

Easy Ways to Save $1,000

Vacation season is upon us and it can be tempting to pull out the plastic.... Read More

Saving Money By Spending Wisely

Why is it that the older and richer people become, the more conservative they are... Read More

Trustees: Who Can You Trust?

Early in my legal career I represented two young women in their early 20s.Their mother... Read More

Residual Income - The Myth

"Join our program and retire in 3 months..." yeah, right.We all want to get to... Read More

5 Easy Ways to Save and Build Wealth

1. Pay off high-cost debt. The best investment most borrowers can make is to pay... Read More

Principles to Ensure a Fantastic Financial Finish

Most people want to get to the end of their lives and be able to... Read More

Does the Moon Have Covers?

Recently, one late winter night, my four-year old son and I counted stars with one... Read More

Online Retirement Opportunity: Freelance Copywriting

For most of us, the idea of retiring simply on our pension is not a... Read More

Dont Leave Your Financial Success To Chance

Recently I was reading a book called The Millionaire Mind. The book offers an intriguing... Read More

The 11 Best Money Saving Ideas of All Time - Part 2

At any time in history, no matter what the current state of the economy, no... Read More

Your Money Or Your Life

Have you stopped to realize that although you go to school to learn about... Read More

Why do Some People Rake in the Dough while Others Spin Their Wheels to No Avail?

Here's the truth: I have read hundreds and hundreds of books about... Read More

You Deserve To Retire Early

The fact is that most people continue to work for a living, because they don't... Read More

Turn Your Job Loss Into the Opportunity of a Lifetime

There are few things in life that are more stressful than the loss of a... Read More

Turbocharged Financial Planning

Financial planning is an ongoing process individuals and businesses should implement by organizing all aspects... Read More

The Underlying Belief System

Many of us do not consider the underlying belief system about money to be of... Read More

Warren Buffet: Wisdom from the Worlds Richest Investor

In light of the dominant mindset overshadowing the market these days, a breath of fresh... Read More

Wealth Creation and Mortgage Planning - Two Great Tastes that Taste Great Together

What if I were to tell you that almost everything you have been told about... Read More

What Do You Mean By Diversity?

The word 'diversity' is a unique one. It can represent many things, depending upon its... Read More

5 Simple Steps for Serious Saving and Financial Growth

1) Pay off your loan, credit and store card debt and resist the temptation to... Read More