Should
a CRT trustee charge a fee for services? If so, how much? The
uniform prudent investors act states that trustee fees should
be “appropriate and reasonable” and that trustees
are “obliged to minimize costs.” The choice of
trusteeship and the amount of fees to be charged is something
that should have been clearly understood before the trust was
ever created. If the trustee is an organization such as a non-profit
or bank/trust company, the trustee fee often will include investment
management and administration costs. If the trustee is the
donor, the trustee often chooses not to charge any trustee
fee in order to preserve trust income or trust principal. High
trustee fees can be heavily scrutinized by the beneficiaries.
"...trustees
are “obliged to minimize costs.”"
Unlike an organization
that specializes in trusteeship with stated fees, an individual
trustee will need to document the fee charged. It is a good
idea to breakdown the fee by itemizing services rendered or
stating the fee as a percentage of trust assets. In deciding
whether to delegate, the trustee should carefully examine the
total of all fees charged and has a duty to minimize these
costs. It is expected that if the trustee delegates duties
such as investment management or administration, the trustee
will lower its fee.
Administration
Fees
If
you are a trustee that doesn’t have in-house administration
capabilities, then you will need to find a third party administrator.
There are quite a few administration services a trustee can
choose from. Services range from tax reporting only to full
service administration. The fees charged also differ greatly
depending on what services are performed. If the trustee
feels confident that he/she may safely keep the trust in
full compliance themselves, then paying for a tax reporting
only service will save a lot of money. If the trustee requires
a full service administrator, the annual fees are much higher.
Too often trustees pay too much for trust administration
services.
"Too often,
trustees pay too much for trust administration."
Paying high administration
fees annually that include costs for reviewing the trust for
compliance may be unnecessary. And even if you are paying that 
high
full service fee, are you confident that the trust will even
be reviewed by a qualified tax attorney? Many administration
firms advertise how their legal department supports their administration
services. But too often a trust only gets a full compliance
review if the trust gets escalated to the legal department
because of some red flag or concern the account representative
has while preparing the trust reports and tax returns. Trustees
should be careful when hiring CPA’s that do not specialize
in fiduciary returns. Individual trustees often hire the CPA
that has been their personal accountant over the years because
of their long standing relationship. Many times this results
in both the trustee and the accountant being frustrated. The
accountant will often spend much more time than they wanted
handling the unique reporting requirements and the trustee
may become concerned over delays and higher than expected fees.
"...too
often a trust only gets a full compliance review if the
trust gets escalated to the legal department..."
The following table
compares typical administration and reporting fees for a charitable
remainder trust among different service providers.
|
Annual
Reporting & Administration Fees by Trust Size
|
| |
$250,000
|
$500,000
|
$1,000,000
|
| CRTPro
LLC |
$900
flat fee (over $2M = $2,000)
|
| Average Third-Party Administrator |
$1,250
|
$2,125
|
$3,862
|
| Average Trust Company |
$2,175
|
$3,750
|
$6,000
|
©CRTPro
2004
