My brother died 10 years ago leaving behind a wife and 2 kids. My mom died a year and a half ago. My brother’s share of the estate (involving land and cash) was put in a trust for the benefit of my niece and nephew and payable when the youngest turns 25, about 10 years from now. I was appointed trustee.
My question is can or should I pay myself for administrating the trust? I spent over 2 hours last weekend getting the financial summery ready along with paperwork for taxes. Plus hours spent throughout the last year paying taxes, insurance, dealing with the tenants, bookkeeping, etc…
My lawyer says that there is a provision in the trust for “payment for reasonable expenses incurred in administrating the trust” which I have used for stamps and envelopes. On the other hand he said many trusts have a provision that the trustee is paid a certain percentage of the trust to the trustee for the trustee’s time in maintaining/administering the trust, which this one doesn’t have this provision. So he really didn’t have a good answer for me as nothing is stated that I should be paid for my time.
Should I write off the 20+ hours I spent last year managing the trust out of the goodness of my heart for my niece/nephew? Or this year charge the trust $10.00/hour, add up the hours and pay myself at the end of the year? My sister in law was NOT happy that the money didn’t go straight to her kids upon their grandmother’s death and is questioning me on things about the trust. My lawyer already contacted her and reminded her that she has no say in how the trust is administered but is allowed to look over the paperwork as guardian to her minor children. He did tell me though that she could sue me for mishandling the trust and try to take it over if she feels I am mismanaging it.
IANAL, but I have a similar setup in my will for my kids with my brother as trustee.
If I was in your situation, I would pass on hard costs (legal, accounting, etc.) but not my time. If I couldn’t handle it myself, I would hire a professional property management company to deal with the tenants and have the trust pay the fees.
As a trustee you act as a fiduciary and have a responsibility to act in the best interest of the beneficiaries. As long as this is the case, you shouldn’t have any issues with your SIL.
If you pay yourself a self-calculated rate to do the same work, you’ve put yourself in a conflict-of-interest situation. I don’t know what the law is where you are, but around here, it’s wrong for a trustee to put them selves in a conflict-of-interest situation even if they do everything else right.
The degree of “wrongness” is not the same as stealing from the trust, but where it’s not specifically outlawed by regulation (as it sometimes is), it still may be “incompatible with the duties of a trustee”
I was recently going through old papers after the death of my father and came across my uncle’s (my mother’s brother) will. My father was a lawyer and was the executor or the will. The will explicitly allows him to bill usual and customary rates for his services as executor. I have no idea if or what he charged against the estate, but this was a complex estate in the mid 8 figures (CAD$).
I would not charge a dime except for outside help. I can & will afford to donate over 100 hours of my time a year to help my kin.
If SIL becomes a PITA, I tell her that unless she backs off, I will let the lawyer do more of the administration stuff. Then if she continues to be an issue, I do exactly that. At the end of each year she gets a copy of the billing so that she gets to see how much she is costing her kids. Once the kids become adults in your or their state / province, the kids get annual copies of said billing. Yes, I can be a major butt if pushed.
BTW, SIL always gets a copy of the billing each year, as do the adult kids. I have nothing to hide. Depending on the family dynamics, the kids may get the paperwork sooner, but once they start to receive it, they get it each year. Once all the kids are adults, then my lawyer sends SIL a notice that she now has no right to this information & she stops receiving it. This may seem a bit harsh, but I am not going to play silly games with SIL. Been there done that.
Keep in mind that the grandparents had a reason to appoint you as trustee instead of her.
When my mom died she left everything to her three children. We then agreed to put the money into a trust for two children of a nephew as a college fund. My brother wrote up all the specifics and sends us a yearly summary of how the money is doing.
At one point he looked into paying himself for the time spent, he’d then want to put the money back into the account, but it proved better just to not be paid.
She received the financial summery I typed up. “Why is insurance so expensive? I called my agent and he said it would be $XXX.XX through them”. Because it is a stand alone policy not eligible for multi-policy discount. “Why are you only getting $YYY.YY per acre for rent? I talked to a coworker and their dad gets $ZZZ.ZZ per acre.” Because of the type of farm ground and it is 1 of 3 parcels and the same farmer farms all 3. “Why did you get a 60 month CD at “ABC” Bank instead of “XYZ” Credit Union? XYZ pays a better interest rate.” Because I was advised by the lawyer to set up the account at a Federal(?) Bank not a Credit Union.
I finally reminded her that she has no say in how the trust is run and if she and her lawyer wants to come to my house and look over the books I would be more than happy to show him/her. If she does this I would again be spending my time, free of charge, to do work for the trust.
Why? What happens when the trustee is a professional rather than a relative? They are still paying themselves for their own time, and there’s a lot of trust involved that they actually spent the time that they are billing for.
I was the trustee for my father’s living trust, with myself and my sister as beneficiaries (or whatever the correct term is). I paid myself a relatively small flat fee every year to cover the time and expenses of the job, which included managing a private home sale that had started when he was alive and which was finally re-financed ten years later, plus doing the trust taxes for those ten years. Managing property is work, and in my case it was a headache. Did the originator of the trust expect the trustee to work without compensation? Does the SIL? That seems like an imposition to me, relatives or not. I would never expect that, and my trust is written to allow for compensation to our friend if she is called on to be trustee.
There are questions and there are accusations disguised as questions. As SIL shades into the latter your response needs to follow 48’s lead.
Dear SIL,
I see you are dissatisfied with my best efforts. I admit I’m an amateur at this and despite my very best of intentions may not be doing an ideal job. You’re now asking questions better asked of a pro.
In an effort to have the trust managed optimally in all regards I am preparing to hire attorney X (or trust company Y) to make all these decisions in their professional best judgment. All those expenses will of course be expenses of the trust.
Good day, and my love to the kids.
Point 2:
Given the SIL dynamic above, I find it stunningly tone-deaf that you'd be thinking about trying to charge the estate for your time.
I totally get the idea that as she makes it harder, both in terms of hours spent and in terms of aggravation per hour, you want recompense. OTOH, if you wanted to pour gasoline all over yourself and your joint relationship then hand her a loaded flare gun you could hardly do better.
The incremental dollars you would honestly gain would cost you dearly. Very dearly. As to that idea I say “Run away! Run away!”