While the probate process and expenses, such as court costs and Executor’s commissions, are avoided or substantially reduced with the Revocable Trust, the Trustee is entitled to commissions for administering and distributing the Trust.
Unlike Executor’s commissions, which are paid one time for settling the estate, Trustee’s commissions are paid each year. The statutory annual commissions are currently 1.05% (.0105) of the first $400,000.00 of the trust assets, .45% (.0045) of the next $600,000.00 of trust assets, and .3% (.003) of all additional assets. In other words, while the payment is an annual payment, the rate is substantially less than that for an Executor.
For trusts in excess of $400,000.00, the annual commissions will be less than 1% per year. Additionally, the Trustee is entitled to a full 1% commission on any principal distributions from the Trust (such as upon termination and distribution of the trust assets). However, like the Executor’s commissions, if a family member is chosen as Trustee there may be no commissions paid, or at least the expense goes to the benefit of a family member. Moreover, if you serve as a Trustee during your lifetime, and the Trust terminates upon your death, the maximum commission exposure will be only slightly more than the 1% pay-out commission.
Attorney or other professional fees are still incurred at death for preparing estate tax returns and for settling the Trust (accounting, obtaining releases for the Trustee and distributing the assets). As in the probate situation, the legal and other professional fees for settlement work will depend upon the actual work involved. However, since no formal court filings or proceedings may be involved, generally the legal work is less. The total professional fees can be roughly estimated at the greater of $3,000.00 or three percent (3%) of the Trust fund.
For more information about Trust-related issues, call FitzGerald Morris Baker Firth at (518) 745-1400 or email [email protected].