Serving as a trustee of a trust can be a huge responsibility, so trustees are entitled to compensation for their work. The amount of compensation depends on the type of trustee and the complexity of the trust.
Depending on the trust, a trustee’s duties can include managing trust assets, making distributions to beneficiaries, paying taxes, and creating an annual report of all income and distributions. More complicated trusts, such as special needs trusts, or trusts where the beneficiary is incapacitated, can include many more duties. Performing these tasks can involve a lot of work and responsibility.
The terms of the trust may explain exactly what compensation the trustee is entitled to, but many trusts don’t provide specifics. With no guidance from the trust document, the laws in most states usually require that trustee compensation be “reasonable,” without giving more details. What is considered reasonable is going to depend on the type of trust. Things to consider include the following:
- The amount of time needed to administer the trust.
- The complexity of the trust.
- How many beneficiaries are involved.
- The particular circumstance of the beneficiaries (are they incapacitated or disabled?).
- How often and what type of distributions will be made.
- What type of assets need to be managed.
- The skill set of the Trustee.
Professionals usually charge an annual fee of between 1 percent to 2 percent of assets in the trust.
In addition to compensation for their work, trustees are also entitled to reimbursement for any expenses that they might incur in the course of performing their duties, including travel, storage, and out-of-pocket expenses.