The answer is, it depends. The demands on a trustee can vary widely, depending on the size and complexity of the trust. Some family members serving in this role might simply oversee distributions and not need to charge anything at all for their time. However, the duties of a trustee can often extend far beyond this scenario and warrant financial compensation, even for non-professional trustees who are family members. Such tasks can include making investment decisions about the trust’s assets, arranging distributions to beneficiaries, paying taxes and other bills, and preparing an extensive annual report on the trust’s income and outlays.
So how much can busy trustees expect to be paid? Again, it depends. Complicated trusts require professional trustees, and these generally receive between 1 and 2 percent of the value of the trust each year. Thus, the annual trustee’s fee for a million-dollar-trust would be anything from $10,000 to $20,000. A nonprofessional trustee generally charges considerably less than this — often set at 25 percent of the professional rate — unless the duties are extensive. Another difference is that nonprofessionals are usually compensated on an hourly basis according to the time they put in.
Trustees, both professional and nonprofessional, are also entitled to submit bills for expenses, such as time spent traveling or preparing a property for sale.
However, regardless of who the trustee is, it is essential to review the trust documents, which should outline the terms of payment. If a trust is under the supervision of a court, payment terms must be approved by the court. Some trust agreements will dictate that a trustee receive “reasonable” compensation. To determine what qualifies as “reasonable,” a trustee, or those who are setting up a trust in the first place, might consider consulting an estate planning lawyer in their state.
Above all, whether the trustee is professional or nonprofessional, and regardless of that person’s compensation, it is imperative that that person maintains good bookkeeping that clearly details the work done on behalf of the beneficiary.
Choosing the right trustee and determining appropriate compensation isn’t just a financial decision; it’s a deeply personal one. You don’t have to navigate it alone. At Canonico Wealth Management, we’re here to guide you through every step of your special needs planning journey. From selecting a trustee to ensuring the trust is adequately funded and managed, we’ll help you build a plan that reflects your family’s unique needs. We also provide trust services to our clients, allowing them to maintain our investment management expertise separate from the trust companies. Schedule a consultation today and take the next step toward lasting peace of mind.
Not sure where to start? Check out our article: 5 Considerations in Choosing a Special Needs Trustee,click here.
And 10 Tips to Consider for Special Needs Planning, click here.