Deciding you need to hire a bank or trust company to administer your estate planning trust is the easy part. The hard part is figuring out how much it will cost and choosing the right professional fiduciary to
administer a trust. This article provides an overview of the fees typically charged by trust companies and banks for trust administration services in the United States.
Trust Administration Fees
When you contact a bank or trust company for preliminary information about what they will charge to administer your estate planning trust, they may be reluctant to provide information on their fees without reviewing the trust document. Professional fiduciaries often view each trust as unique. As a result, it can be difficult for a company to provide a fee quote without reviewing specific trust language. Some firms must review the trust documents before providing a fee quote. Nevertheless, many banks and trust companies list their trust administration fees online.
The following is a list of fees you can expect to pay for a bank or trust company to administer a trust:
1. A percentage of the assets held in trust, such as one to three percent of total trust assets per year. The amount charged will vary depending on whether the bank or trust company is managing the trust investment portfolio, administering the trust or doing both. A minimum annual fee may apply. See
trustee investment duties.
2. If the professional trustee does not base fees on a percentage of trust assets, the trustee may charge hourly fees based on services performed.
3. An acceptance fee or an initial fee for serving as trustee.
4. Separate flat fees for various trust administration services.
5. Fees for preparing trust tax returns and any
Trust Accounting services provided.
Fees for managing trust investments are typically separate from fees for administering the trust, so be prepared for this extra layer of fees if you need financial management services.
Also, be aware the trustee may invest trust assets in mutual funds or other types of investments that have fees, commissions, and expenses. If the bank or trust company is given complete discretion to make investment decisions, they can invest the trust in investments with high fees or transaction costs, as well as incur high transaction costs by overtrading, which can reduce the value of trust assets intended for trust beneficiaries. To avoid excessive fees being charged to the trust, ask questions about any fees and expenses associated with the investments the professional trustee plans to make while managing the trust.
In addition to fees and costs charged by the bank or trust company, you can expect to pay legal fees to an estate planning or probate attorney for any legal services required to form, maintain or
terminate a trust.
Disadvantages of Using a Professional Trustee
Hiring a bank or trust company for trust administration is usually very expensive. It is important to determine whether the trust has sufficient assets to warrant using a professional fiduciary.
A professional fiduciary may create increased costs for the trust due to having routine paperwork prepared by a professional rather than having a lay person serve as trustee. But you may benefit from having a trust company prepare important trust administration forms, such as a
trust beneficiary release and other paperwork required to settle or close a trust.If the bank or trust company makes successful investments for the trust and does not charge excessive fees, hiring a professional trustee may be very beneficial. However, if the professional trustee makes investments that incur substantial losses or charges exhorbitant fees, the use of a professional trustee may result in smaller distributions to the beneficiaries or the grantor's goals for the trust may not be fulfilled.
Do You Need a Professional Trustee?
If you are named successor trustee in a living trust document or want to establish a trust as part of your estate plan, you may decide you need the help of a professional trustee. However, deciding you want to hire a bank or trust company to administer the trust is only part of the equation. The other part is determining whether the trust has sufficient assets to pay the trust administration fees associated with this level of service.
Even if you feel you need the help of a professional fiduciary, the trust needs to be of a sufficient size to make it worthwhile for a bank or trust company to serve as trustee or co-trustee. If the trust has assets of less than 250,000 to 300,000 U.S. dollars, it is probably too small to pay the costs associated with professional trust administration. If the trust has assets of 500,000 U.S. dollars or more and will require investment management services, it is probably the type of trust a bank or trust company will want to administer.
After you determine whether the trust has sufficient assets to pay the fees of a professional trustee, the next step is determining what types of services you want the bank or trust company to provide. For a list of trustee duties, refer to our successor trustee checklist form.
One of the primary reasons to use a professional fiduciary is to manage the investment portfolio for the trust. If you do not have the necessary financial background, skills or time to select appropriate trust investments, buy and sell investments for the trust, and handle required distributions to beneficiaries, you may need to retain a bank or trust company to ensure the duties of trustee are properly performed.
While there are several advantages to using a professional trustee for trust administration, those advantages come at a substantial cost. Before hiring a bank or trust company, consider whether it is necessary to pay for the services of a professional fiduciary to ensure trust assets are properly managed and the duties of trustee are properly performed.
A trustee can be held liable for making imprudent investments, mishandling trust funds, breaching the fiduciary duties of a trustee, and for a variety of other reasons. For an overview of how you can potentially be held financially liable as a trustee, as well as reasons you may want to hire a bank or trust company, see
List of Trust Administration Services
Before contacting a bank or trust company to ask for a quote on trust administration fees, become familiar with the types of services you want them to provide. The following is a list of trust administration services typically available from banks and trust companies:
1. Performing all services as sole trustee or performing limited services as co-trustee. For a list of services that may be required, go to Trustee Checklist. A professional trustee can assume all responsibilities for administering the trust or can provide only specific services you require, such as serving as co-trustee with the person named as successor trustee in the trust document. The scope of services is something you will need to agree upon with the professional fiduciary.2. Provide investment management services to invest and manage trust assets. If trust assets will be invested in individual stocks and bonds, mutual funds, ETF's, real estate or similar types of investments, a bank or trust company can provide financial expertise and manage the portfolio of trust assets.3. Prepare trust tax returns. See Schedule K-1 Trust Estate.
4. Handle distributions to trust beneficiaries. See
Trust Distribution Letter.5. Provide a regular trust accounting, provide required reports to beneficiaries, and prepare other communications to beneficiaries.
Negotiating Trust Administration Fees
If the trust has a substantial amount of assets, you should try to negotiate the fee arrangement with the bank or trust company. For example, if the firm is going to charge a percentage of trust assets as a fee, the fee percentage should decrease as the trust assets increase above certain thresholds, such as one million dollars and above. The higher the value of assets in the trust, the more leverage you should have in negotiating the fees.
List of Trust Companies
For an overview of what to expect when you hire a professional fiduciary for estate and trust administration and a list of trust companies you can contact for a fee quote, refer to our article on
Disputes With Trustees Over Fees
If you have a dispute with a bank or trust company over fees for trust administration or financial services, carefully review all documents and contracts relating to the services. Retain copies of all emails, text messages, letters, and other communications relating to hiring the professional trustee, as well as communications made during administration of the trust.If you have questions about what trustees are entitled to be paid for their services, review
fees trustees bill charge. To find applicable laws on what a trustee can charge for trust administration, refer to state statutes, such as the state trust code. If you need legal advice regarding a potential dispute with the trustee over fees and expenses, consult a licensed probate lawyer or estate planning attorney.