Agency trust fee schedules are unique as they fall under agency trustee services. Under an agency trustee service agreement, the individual trustee, private or professional, has control over all trust administration and trust accounting. The trustee services offered by an individual trustee mirror those offered by a corporate trustee. They control and have all the choices around trust distributions and trust investments. They are the sole fiduciary. Agency trust fee schedules are very different when the individual trustee wants to use a corporate trustee.
| First $3 million | 0.20% to 0.35% |
| Next $3 million | 0.19% to 0.25% |
| Next $4 million | 0.09% to 0.21% |
| Over $10 million | Negotiable |
| Minimum Annual Fee | $3,000 |
*Fees for extraordinary or non-standard services will be charged on a time and expense basis, payable by trust assets, for all personal and charitable trustee/trust services.
Agency trustee fee schedules require many moving parts. Below is a flow chart of who does what at a high level.
The individual trustee assumes a dramatic role with many legal and fiduciary rules. Discretionary distributions decisions, impartiality, knowing when to ask for help, coordinating with legal, tax and financials plus following the rules of the trust document. Whew! That’s a lot. Individual trustees can use the help of a corporate trustee with some of those tasks. The separation of trust accounting and trust administration can be confusing for most individual trustees. Those tasks get summed up in an agency trust fee schedule.
The individual trustee is generally not required but it is wisely suggested to provide some sort of quarterly principal and income accounting statement. This is not a CPA general ledger type of report. Trust law separates gains, losses, income, distributions and expenses between principal and income. This is detailed inside the trust document and within the trust law statutes that the trust falls under. The trustee needs to understand these rules and the beneficiaries, should anything go awry, will look at these quarterly trust accounting statements. The corporate trustee helping individual trustees assist in the creation and preparation of these trust accounting statements and comprises one part of the agency trust fee schedule. To create the trust accounting statement the individual trustee needs map out the location of all trust assets; 1) bank; 2) brokerage; 3) real assets; and/or 4) IP assets. The issue becomes how to automatically integrate all the monthly transactions into a seamless report that captures anything occurring within the trust. This involves the pricing of marketing securities, entering all the transactions (e.g. buys, sells, interest payments, dividends, re-investments etc.) for bank and brokerage accounts. These work needs to occur and separate between each trust.
The tricky part about trust principal and income accounting deals with trust distributions and the number of beneficiaries. If there is one beneficiary then the accounting is easy peasy. When there are more than one beneficiary the individual trustee has to separate who got what, when and why. This is why “pot trusts” where there are multiple beneficiaries for each trust can be very cumbersome. If Jack never takes a distribution but his brother John then the individual trustee has to correctly account for this imbalance with the trust accounting schedule. The CPA preparing the tax returns will also have to deal with the separate issues in the example above when sending out the K1s. Not hard but all based on the correct trust principal and income accounting. The agency trust fee schedule covers services to the individual trustee around guidance for these issues. The complication also arises when the financial advisor, through communication and guidance from the individual trustee, has beneficiaries with different investment objectives and risk tolerances. The individual trustee has to weigh these issues against the overall intent of the trust, distribution requirements and other estate planning considerations. A whole lotta work for someone who may not be doing this professionally.
The individual trustee needs to coordinate with the financial advisor and the CPA. Those duties and responsibilities can require many little consistent steps throughout the year. The individual trustee will need to coordinate tax planning during 3Q and 4Q with the CPA as well as with the financial advisor. If the trust holds real assets those need to included into the overall CPA tax planning. The corporate trustee offering agency trustee services would not have any role during this process except guidance. Their agency trust fee schedule regulates its role to guidance and completing the trust principal and income accounting following standard procedures. Agency trustee services for individual trustees can be a high value-added service.
