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What Are Trustee Fees?

Trustee fees are most common after a substitution of trustee.
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  • Written By: Jim B.
  • Edited By: Melissa Wiley
  • Last Modified Date: 30 August 2014
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    Conjecture Corporation
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Trustee fees are fees paid to the person or entity acting as the trustee of a living trust on someone's behalf. These fees usually arise when a successor trustee takes over the administration of the trust upon the death or incapacitation of the person who originally enacted the trust. In many cases, trustee fees are determined by stipulations within the trust, while state laws may be applicable if no such stipulations are found. The amount of these fees may be a percentage of the funds within the trust or a one-time payout, and the trustee may also receive money for expenses incurred while fulfilling his or her obligations.

Many people enact trusts to protect their wealth for future generations. If the trust is a living trust, the person who created the trust, known as the grantor, often serves as the trustee, who is the person in charge of managing the trust, following its instructions, and distributing the wealth and assets of the trust to beneficiaries. When the grantor dies or becomes too ill to manage the trust, the trustee duties fall into the hands of a successor trustee. Whether this new trustee is a friend or family member or a professional entity like a bank or an attorney, the new trustee is paid trustee fees as recompense for the work put in and costs incurred while handling the trust.

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When the trust is created, the grantor may include specific instructions pertaining to the payment of trustee fees. The most common form of payment is a small percentage of the funds or assets within the trust itself. For example, if a trust stipulates that the successor trustee be paid 2 percent of the trust's wealth in a given year, and the trust was worth $1,000,000 U.S. Dollars (USD), then the trustee would receive $20,000 USD that year for performing his or her duties. A single lump-sum payment as a bequest to the trustee may be used as well, which would be beneficial to the trustee for tax purposes.

As the trustee fulfills his duty, he will come upon many expenses that need to be paid. These can be costs incurred prior to the trustee's taking over the trust, like doctor bills, funeral expenses, and estate taxes or everyday expenses that arise like travel and postage. The trustee is usually due reimbursement for expenses like these as part of the trustee fees.

In cases where there are no specific stipulations in the trust regarding the fees, state laws in the United States, though varying, usually contain language saying that the trustees are due reasonable recompense for their work. The state involved will then decide on what that reasonable payment is depending on the specifics of the trust itself. It should also be noted that sometimes the grantor of the trust, even while still living and healthy, will use a separate person or entity as trustee and that trustee fees would apply in that situation as well.

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Post 1

If a trustee isn't careful, an entire estate can get eaten up with trustee fees. Well, that's not always the trustee's fault -- legal fees can be taken out of the trust should the trustee or the estate be sued by an angry relative or another party who is upset over the terms of the estate at issue.

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