It is not something you should take lightly when you ask someone to act as your fiduciary (trustee of your trust or personal representative or executor under your last will and testament). If you want to appoint a family member or friend to one or both of these roles, you must decide whether or not you want them to be paid from the trust or estate for the services they perform to the trust beneficiaries or estate heirs.
What is a Reasonable Fee?
To provide some guidance on the “reasonableness” standard, the Uniform Law Commission, and case law have offered the following factors to assist the courts (and the parties in court cases) in determining what makes a fee “reasonable.”
Typical Fees: When a court is asked to determine whether fiduciary fees are appropriate, it first analyzes the fees charged by professional or corporate trustee businesses in the region.
Trustee’s Skill: Another essential aspect is the skills or experience that your trustee may offer to the table. Simply said, while acting as a trustee, an attorney or a certified public accountant (CPA) will provide far more expertise and experience than a professional musician.
Time Required to Fulfill Duties: If the fee appears to be excessive, especially when compared to the value of the estate or trust’s assets, the fiduciary must be able to demonstrate that the time spent on those fiduciary responsibilities was essential for the estate or trust’s proper administration.
Value and Type of Trust Property: Some types of trust property are far more difficult to manage than others. For example, dealing with a $800,000 savings account is considerably easier than dealing with five rental homes in a poor section of town where renters have caused considerable property damage.
Difficulty Level: Some trust and estate administrations can be very straightforward and easily managed. For example, if a widow leaves all her property and cash to her only child, outright and free of continuing trusts, the degree of difficulty would be very low. On the other hand, if the deceased had been married multiple times and left a surviving spouse as well as children and grandchildren, the fiduciary’s duties could be exponentially more difficult.
Responsibility: Different types of responsibilities may require different levels of compensation.
Risk involved: If a trust holds certain types of business property associated with high risks or volatile value fluctuations, the trustee may personally be at much greater risk with regard to being responsible for the proper care and management of that property.
Conclusion
Whether you choose a corporate or professional fiduciary or a family member or friend to act as trustee or personal representative, discuss with your estate planning attorney the issues surrounding trustee compensation to ensure that you understand how to handle this important element of your estate planning and that it conforms to your ideas about what is reasonable and what is not.