What Is the Average Fee for a Trustee?

A trustee plays a significant role in managing a trust, overseeing assets, and ensuring the grantor’s wishes are fulfilled for the beneficiaries. This responsibility involves considerable time, expertise, and diligence, making compensation a necessary cost of trust administration. Understanding these fees is important for those establishing a trust and its beneficiaries.

How Trustee Fees are Calculated

Trustee fees are commonly determined through several methods. A widely used approach is a percentage of assets under management (AUM), where the trustee charges a specified percentage of the trust’s total value annually. This method often features a tiered structure, with a higher percentage applied to initial asset value and decreasing percentages for larger amounts.

Some trustees, particularly individual professionals, may opt for an hourly rate. This method involves charging for actual time spent on administrative duties, investment management, or other trust-related activities. Hourly rates vary based on the trustee’s experience and the complexity of the work performed.

For simpler trusts or clearly defined tasks, a fixed fee may be applied. This involves a predetermined, flat amount for specific services or for the entire administration of a straightforward trust. A fixed fee provides certainty regarding costs for both the trustee and the beneficiaries. A hybrid model combining a base annual fee with an hourly rate for extraordinary services may also be utilized.

Factors Affecting Trustee Fees

Several variables influence trustee fees. The complexity of trust assets significantly impacts fees; trusts holding diverse assets like real estate, closely held businesses, or illiquid investments typically command higher fees than those with readily marketable securities.

The overall value of trust assets also plays a role, as higher asset values generally lead to increased total fees, especially under an AUM model. Larger trusts might benefit from lower percentage rates due to economies of scale. Trust administration complexity further influences costs, with factors such as discretionary distributions, multiple beneficiaries, ongoing communication requirements, and intricate tax planning increasing the trustee’s workload.

The type of trustee selected is another determinant. Corporate trustees, such as banks and trust companies, often have robust infrastructure and specialized staff, which translates to higher fee schedules. Individual trustees, who might be family members or friends, may charge little to no fee, while professional individual trustees fall somewhere in between. Geographic location can also affect fees, as prevailing rates for professional services differ across various regions.

Typical Trustee Fee Structures

For individual professional trustees, annual fees often range from 0.5% to 1.5% of assets under management. When charging hourly, individual professional trustees typically bill between $100 and $175 per hour, while non-professional individual trustees might charge $25 to $75 per hour.

Corporate trustee fee schedules are generally more structured, commonly based on a tiered percentage of AUM. These fees typically range from 0.5% to 2% annually, with the percentage decreasing as the trust’s asset value increases. Many professional and corporate trustees also impose minimum annual fees to cover their administrative overhead, regardless of the trust’s size.

Understanding Trustee Fee Agreements

A transparent, written fee agreement is important when engaging a trustee, outlining all anticipated charges. This agreement should detail services covered by the base fee, such as routine administration, record-keeping, and basic tax reporting, and specify any services incurring additional charges, including specialized legal advice, complex tax preparation, or management of unique assets like real estate.

Fee agreements typically specify the payment schedule, with quarterly or annual payments being common arrangements. Trustees are also entitled to reimbursement for out-of-pocket expenses incurred in managing the trust, such as travel or storage fees.

Trustee fees are often set within the trust document or by prevailing “reasonable” standards. Negotiation may be possible, particularly for larger trusts or when defining the scope of specific services. Beneficiaries generally have the right to review and, if deemed excessive, challenge trustee fees, often through court oversight or specific provisions within the trust document. Trustee fees are tax-deductible for the trust and considered taxable income for the trustee.