Monterey Herald

Trustee's fees are too high


Q : My wife and I are interviewi­ng potential trustees to take care of things when we are gone. How do trustees usually get paid? Do we pay them now or do they take fees from our accounts after we die? One that we spoke with said they take their fee and any fees paid to an attorney for legal work or an accountant for tax work is also paid from our estate. All these fees add up to quite a bit. We are surprised that the profession­al trustee doesn't pay the legal and tax costs out of their fees. A : Licensed profession­al fiduciarie­s can either charge by the hour for services they perform or may charge a percentage fee. The way the percentage fee works is that when you both pass away and it is time for the trustee to step in, trust assets are appraised and the trustee charges a percentage of that value. The rate is usually around 1% of the value of your estate and this is a one-time fee. So, if you have a $1 million estate, the fees for the trustee would be around $10,000. For larger estates, the percentage is less. It is usual and customary that legal and tax fees are paid from the trust and do not come out of the trustee's fee.

If fiduciarie­s charge by the hour, the hourly rate can run anywhere from $95 to $300 per hour. A layperson acting as trustee can also charge a fee and the rate depends on their expertise. If they need an attorney to address every detail of the administra­tion which results in higher legal fees, the trustee's hourly rate should be lower. If they are financiall­y and legally savvy and need little legal, tax or financial assistance, they can charge a higher rate.

Most bank trust department­s charge the percentage rate and are similar to the rate charged by licensed profession­als. Trust documents usually state that the trustee shall be paid a “reasonable fee.” When using a licensed profession­al fiduciary who is overseen by the California Department of Consumer Affairs, reasonable­ness is gauged by what bank trust department­s in the area charge for similar services.

Trustee fees are tax deductible in most circumstan­ces so that

should be considered when shopping for a trustee. Also, all profession­al trustees are not equal so you should decide if the profession­al you are considerin­g is a good fit for your family and who also has the knowledge, expertise and experience to address your particular mix of assets, has a succession plan in case they are not able to complete the work when needed, and who has appropriat­e risk management practices.

You may feel like the costs to settle your estate may be high, but you are placing all your “trust” in their hands. You need to feel confident they are going to do the job well and expeditiou­sly. I often have trusts transferre­d to me where a trustee, usually a layperson, has not distribute­d the trust for years and sometimes decades. There is no excuse for this kind of delay. Knowing that your estate will be handled the way you want it to be handled and your beneficiar­ies treated respectful­ly, well, that's priceless, don't you agree?

Liza Horvath has over 30 years of experience in the estate planning and trust fields and is a licensed profession­al fiduciary. Liza currently serves as president of Monterey Trust Management. This is not intended to be legal or tax advice. If you have a question, call (831) 6465262 or email liza@ montereytr­

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