I am often amused by the ads and offers I see about
living trusts.
Almost always, one of the great selling points is how to make a living
Trust will save thousands of dummies in “nasty” probate fees.
This leads the consumer to believe that you pay for legalization,
but living trusts are “fr * e”. (that is, after having paid the
developer to set one up for you).
Not so.
Here is an email that I received from one of my subscribers.
(she has given me permission to discuss her question in this
Article):
Hi Phil,
My mom recently passed away and my sister is the first trustee.
She claims that she gets 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 greatest, if not the greatest,
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 answer to these questions,
I think the proper thought is “Uh-ohh!”
Okay, let’s quickly review the trustees’ fees.
Let’s first make a distinction between the times that a trustee can
be called to act.
Remember, one of the best uses of a trust is managing the
assets of someone who is disabled. My best friend and
her sister has been handling her mother’s affairs (such as
trustees) for the past 10 years. Mom is 95 years old, in decent physique
health, but has advanced Alzheimer’s).
Let’s save the discussion of the trustees’ fees charged for
manage the estate of an incompetent for a future article. Let’s go
Start answering the question above.
Here it is again:
Hi Phil,
My mom recently passed away and my sister is the first trustee.
She claims that she gets 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 to
manage property after a death? “
How do we respond to this?
First, we have to look at the trust instrument.
Most competently drawn fiduciary instruments will have a section
which takes care of the trustees’ 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 an estate).
So first, we look at the trust instrument. Will often specify
a fee. Sometimes it will say .75% to 1.25% of the total value
of assets that are managed and transferred (as 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 trustee fees.
(each state will have a statute, go to your county law library
and ask the Law Librarian to help you find it.)
In California, the living trust law is contained in the
Probate code. Here’s what Probate Code Sections 15680-82 tells us:
15680. (a) Subject to subdivision (b), if the trust instrument
provides for trustee compensation, the trustee has the right
to be compensated in accordance with the trust instrument.
(b) After proper filing, the court may fix or allow a greater
or less compensation than could be allowed under the terms of the
relying on any of the following circumstances:
(1) When the trustee’s duties are substantially
different from those contemplated at the time of the constitution of the trust.
(2) When compensation in accordance with the terms
confidence would be unevenly or unreasonably low or high.
(3) In extraordinary circumstances that require fairness
relief.
(c) An order that sets or allows greater or lesser compensation.
under subdivision (b) applies only prospectively to actions taken in
administration of the trust after the order is placed.
15681. If the trust instrument does not specify the
compensation, the trustee is entitled to reasonable compensation
under the circumstances.
So to answer the question, we have to find out what the trust is
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 of the different bank trusts
departments in the area to determine their rates. Where
live, the fee is from .75% to 1.20%, depending on the size of the
trust and type of assets. The minimum is $ 5,000.
So it seems that the answer to the question is that if the
trust instrument says first trustee is entitled to 10%
compensation, then she can be. However, if not,
The amount to be collected must be reasonable.
And, even if the confidence instrument said 10%, seriously
consider asking a court to change compensation for
15680 (b) (2) allowing the court to change compensation
“When compensation in accordance with the terms of the trust
it would be unfair or unreasonably low or high. “
This article must continue as not even
Played the big m * ney m * ker for trustees and attorneys,
“extraordinary rates”.
Good luck and see you 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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