Trusts can be a very beneficial part of your estate planning. Trusts can be used for much more than just probate avoidance. Living trusts allow you to protect the property you want to leave to your heirs, while planning to reduce estate taxes at the same time. A trust can also be helpful in preparing for the possibility of incapacity or avoiding will contests or other disputes. When considering whether to incorporate trusts into their estate plans, clients often ask about the annual fees for a trust in Arkansas. The fees will depend on various factors.
Compensation of trustees
Trustees are entitled to compensation for their services. How much they are entitled to, and how much they will actually charge depends on the type of trustee and the state where the estate is being probated. Typically, relatives and close friends who have agreed to serve as your trustee do not charge a fee. On the other hand, if your trustee is a financial institution, for instance, there will be a fee schedule based on the nature of the trust services being provided. Annual trust fees will generally run somewhere between one and two percent of the total value of the assets being administered under the trust.
Setting the fees ahead of time
For trusts that are not court-supervised, it is a good idea to set a limit on the trustee’s compensation in the trust document itself. With no court supervision, there are generally no restrictions of limitations on the compensation of trustees. If you set the compensation ahead of time, there will be no dispute between the trustee and the beneficiaries in the future, regarding the amount of the fees that will be paid.
Court supervision of trust management
It is more likely that your trust will be administered under court supervision. In those cases, the court will be responsible for determining an appropriate or reasonable fee for the trustee and entering an order for that amount to be paid from the estate. There are certain criteria that courts usually consider in determining what constitutes reasonable compensation for a trustee. Those factors often include:
- the gross income of the trust
- the success or failure of the trustee’s administration, as measured by the growth in the value of investments
- any unusual skill or experience the trustee has brought to the position
- the “fidelity” or “disloyalty” shown by the trustee
- the degree of risk and responsibility assumed by the trustee
- the amount of time the trustee devotes to performing trust duties
- the custom in the community, including the compensation allowed to trustees by Trustors or courts typically in that community
- the quality of the work done in administering the trust
- any estimate the trustee has given concerning the value of his or her own services
These factors may vary depending on the court and not all of them will necessarily be considered in every case.
If you have questions regarding trust fees, or any other trust administration issues, please contact Sexton, Bailey Attorneys, PA online or by calling us at (479) 443-0062.
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