Trustee Fees: What Is a Normal Fee and Who Pays It?

When you’re planning your estate, one of the things you need to consider is how much it will cost to hire a trustee.

Trustee fees cover the cost of managing your financial affairs when you have been deemed unable to handle them. They also provide benefits for survivors, beneficiaries, and heirs.

Trustee fees vary depending on the services provided, but on average, they range from 1% to 2% of the value of the estate.

In general, a trustee fee includes:

  • An hourly rate that covers the time the trustee spends on your case
  • A retainer to cover the costs of setting up and managing your trust
  • Miscellaneous expenses, such as travel or postage

Who Pays the Trustee Fees?

The fees for managing your estate will be paid by your trust. If there isn’t enough money in the trust to cover the trustee fee, the balance must come out of your estate.

If you don’t have a trust and assets that need to be managed by a trustee, it’s likely that beneficiaries or heirs will pay the trustee fees.

For instance, if you give money to your brother and he names a trustee to handle his inheritance, it might be the case that the trustee fee will come out of his share.

If there is no one else involved in your finances, then your executor (the person handling probate) will pay the trustee fees on behalf of your estate.

It’s important to note that the trustee is not allowed to profit from their position. Trustees can only charge what it costs them to provide the services outlined in their contract.

What Are Normal Trustee Fees?

The average trustee fee for an estate valued at $500,000 is 1% to 2%. This means that the minimum charge would be $5,000 and the maximum charge would be $10,000.

If your trust is worth more than a million dollars, you can expect higher fees of around 3% to 4%.

In some cases, the trustee fee is negotiable. It’s worthwhile to see if you can negotiate a better rate.

For example, if you’re hiring a trustee to manage a family trust, you may be able to get a discount if you agree to have all communications go through the trustee.

Some trustees also charge a flat fee instead of an hourly rate. This can be more advantageous if the trust is small and contains few assets.

How Are Trustee Fees Calculated?

The fee a trustee charge is based on the services they provide. The most common services are outlined below.

Hourly Rate

This is the rate the trustee charges per hour for their time. This includes the time they spend meeting with you, researching your case, and handling paperwork.

For instance, if the trustee charges $50 per hour, and they spend 10 hours on your case, you will be charged $500.

Retainer

A retainer is a set amount of money that the trustee charges to cover the initial costs of setting up and managing your trust. This usually includes things like filing fees, postage, and legal expenses.

For example, if the retainer is $1,000, and the trustee charges 1% of the estate value, you can expect to pay an additional $10,000 for their services.

Miscellaneous Expenses

This is money the trustee charges for any other costs related to your case. This might include travel expenses, copying costs, or courier fees.

An example of this type of expense is if the trustee has to travel to meet with you and your family.

How Are Trustee Fees Taxed?

When calculating your trustee fees, it’s important to remember that the trustee fee is taxable income.

This means you must pay taxes on the amount of money you receive for managing assets. You will also have to pay local and state taxes on the money your trust earns through investments.

If you’re concerned about the amount of taxes you’ll have to pay, speak with a tax lawyer.

In most cases, the trustee fee will be taxed as ordinary income.

Can Trustee Fees Be Waived?

Sometimes, trustees may be willing to waive their fees.

Typically, an heir or beneficiary requests this when the person managing the trust has no other income, is low income, or is in need of financial assistance themselves.

Unfortunately, many trustees are not willing to waive their fees. If you request to have your trustee fee waived and they are not willing to do so, you may need to find another trustee.

The Bottom Line

Now that you know a bit more about trustee fees, it’s important to ask any questions you have before hiring a trustee. Fees can vary based on the size and complexity of your trust, so it’s important to get an estimate in advance.

If you are concerned about the fees, speak with a lawyer to find out if waiving the fee is an option.

A trustee fee is the charge a trustee levies for their services. This fee is based on the time and effort the trustee puts into your case, as well as any other associated costs.
The person who has assets in the trust must pay the trustee fee. This is usually an heir or beneficiary of the trust.
Trustee fees are usually calculated based on the time spent on the case, the size of the estate, and the services they provide.
The amount of money trustees earn through their fees is considered taxable income. This means you must pay taxes on this income, as well as local and state taxes if your trust earns any interest or dividends from investments.
Some trustees are willing to waive their fee, especially if the heir or beneficiary is in need of financial assistance. However, trustees are not required to waive their fee. If a trustee is unwilling to waive their fee, you may need to find another trustee.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.