How Much Will My Trustee Get Paid?
One question we commonly receive is whether the trustee of the trust or the personal representative (sometimes called executor) of the estate should be compensated for their work. While family members often forego compensation, the answer is an emphatic yes! Being a trustee or personal representative is a really big job. And, it is a thankless job for the most part. There are two ways a trustee or personal representative will become entitled to compensation for their services, first, if state law provides for it, and second, if the will or trust provides for it. While every state is unique, most states provide that a personal representative is entitled to compensation regardless of whether or not compensation is spelled out in the will (or if there is no will in the event of an intestate estate). The Uniform Probate Code which has been adopted by many states, including the states we are licensed in (Arizona, Idaho, and Utah), provides that a personal representative is entitled to “reasonable compensation.”
The Uniform Trust Code, on the other hand, has been far less widely adopted and whether and how a trustee is compensated statutorily can also vary widely. While Arizona, Idaho, and Utah are fairly similar in how personal representatives are compensated, they differ in their approach to trustee compensation. One of the variables is whether or not the trustee’s right to “reasonable compensation” can override the terms of the trust. On the other hand, all three would allow the personal representative’s right to reasonable compensation to override and amount provided for by will.
One of the best ways to approach the matter is to explicitly state in your will and/or trust that the person is entitled to reasonable compensation. Even better would be to go further and state that reasonable compensation shall not be less than a stated amount. Obviously what is reasonable can vary by location as well as the complexity of the estate. Institutional trustees such as banks or trust companies will often charge a percentage of assets under management. These fees often range between 2% and 3%. Institutions may also add an hourly fee for managing non-publicly traded assets, such as real estate. A non-institutional professional, such as an attorney, accountant or other professional fiduciary, will usually charge an hourly rate. These rates often range from $100 to $400 per hour. There may also be a minimum base fee. When it comes to a non-institutional private individual, such as a friend or family member, the issue of what is reasonable gets a little tougher to define. Therefore, it becomes even more important to identify what you think is reasonable – at a minimum.
While institutional and professional trustees are well trained in keeping track of their time, the non-professional individual is often not used to these rigors. A trustee/personal representative should keep detailed records of any time spent on the matter. This would include the date, the amount of time spent, and a detailed description of the work undertaken. We recommend tracking time in six (6) minute increments, rounding up to the nearest number. For example, each six minute period equals .1 of an hour, if a person spent eight minutes on a task the person would list the time as .2 of an hour. Additionally, it is important to understand that all time spent will not be considered “Trustee” or “Personal Representative” services. For example, cleaning out a storage facility may take time, but it is just general labor, not Trustee services, and should be charged at a rate consistent with that type of work.
So make sure your will and trust provide that the person providing these important services can be compensated and take some time to include provision as to what that will mean.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.