Creating a trust is a significant step in ensuring your assets are managed and distributed according to your wishes. One crucial aspect of this process is selecting a trustee, the person or entity responsible for carrying out your instructions.
At Windrose Law Center, we often see clients choose trusted family members, such as children or siblings, to serve as trustees. This choice offers familiarity and peace of mind, knowing that someone you love will handle your affairs. The people closest to you are often in the best position for the job while understanding and honoring your wishes.
When a family member who is also a beneficiary of the trust is selected as trustee, we typically do not provide trustee compensation for those trustees. Since they stand to inherit a portion of the trust’s assets, compensating them as trustee would essentially just take a portion off the top of their inheritance. Generally, it is not necessary to provide for compensation in these scenarios. However, the decision is ultimately yours to make as the creator of the trust.
However, if you opt for a trustee who is not also a beneficiary, it’s important to consider providing compensation for their services. Managing a trust involves various responsibilities, including investment management, record-keeping, and distribution of assets. Offering compensation acknowledges the time and effort required to fulfill these duties effectively.
There are several approaches to trustee compensation:
- Lump Sum: You can specify a fixed amount to be paid to the trustee. To account for inflation, you might consider adding a provision that adjusts the lump sum over time.
- Reasonable Fee: This option allows for flexibility, as the trustee’s compensation would be based on the actual work involved and the complexity of the trust.
- Percentage of the Trust Estate: Some trusts stipulate that the trustee receives a percentage of the trust’s value as compensation. This approach aligns the trustee’s interests with the growth and preservation of the trust’s assets.
You might also consider reimbursing the trustee for their expenses while they are acting as the trustee. For example, if they will need to travel from another state to conduct affairs for the trust, you might consider adding an express provision that would reimburse those expenses.
Ultimately, the best approach to trustee compensation depends on your individual circumstances and preferences. Our experienced attorneys at Windrose Law Center can guide you through the decision-making process, helping you choose a trustee and compensation structure that best suits your needs.
We understand that creating a trust can be complex, but we’re here to offer patient guidance with a low-pressure, low-stress approach. If you’re considering establishing a trust or have questions about trustee compensation, you can schedule a free, 30 minute consultation with us today.