Are there professional trustees that charge by the hour?

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RatherBeFishing
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Are there professional trustees that charge by the hour?

Post by RatherBeFishing » Fri Aug 17, 2018 8:55 am

Trying to do some estate planning. I have a lost cost, passive approach investment advisory firm that I'm happy with, and would like for them to continue the investment management after I'm gone. I just need a corporate trustee to do the trust administration. Would such an arrangement be feasible, and if so, are there professional trustees who charge for the actual services performed, on an hourly basis, rather than a percentage? Thanks for any replies.

daveydoo
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Re: Are there professional trustees that charge by the hour?

Post by daveydoo » Tue Sep 18, 2018 1:05 am

I'm sure there are but would you trust their billing? From my own experience in this role, there "should" be months of zero billing. I doubt you would see that. :D

A relative hired a cheap-by-the-hour estate attorney, but the hours were endless. The expensive attorney we replaced him with was a lot cheaper.
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

bsteiner
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Re: Are there professional trustees that charge by the hour?

Post by bsteiner » Tue Sep 18, 2018 7:45 am

There are some trust companies, mainly in Alaska, Delaware, Nevada and South Carolina, that don't manage the assets, and charge a fixed annual fee (usually in the mid to high 4 figures to the low 5 figures annually). We mainly use them when we want to have a trust governed by the law of one of those states. But that also works for people who have someone else they want to manage the assets.

Depending on the situation, lawyers are sometimes willing to act as trustee at their usual hourly rates.

gotlucky
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Re: Are there professional trustees that charge by the hour?

Post by gotlucky » Tue Sep 18, 2018 8:53 am

The problem I see is that the liability associated with being a Trustee is proportional to the trust assets.

If you want to pay by the hour and the trust has significant assets, the trustee needs to spend more time making sure he is fulfilling his trustee duties as a fiduciary.

If I'm asked to be a trustee for a close friend and he only has a small estate, I'll essentially do it pro bono. However, if he has a large estate and doesn't compensate me for my time and, more importantly, my liability, I'll turn it down. I've seen the headache of dealing with seemingly straightforward trusts.

So charging a percentage of assets to act as a trustee is probably the simplest, conventional and most fair way of doing things unless you have a family-office-size trust. I suppose you can impose a sliding scale for a trust worth more than, say, $10MM and index that to inflation. Keep it simple, stupid.

afan
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Re: Are there professional trustees that charge by the hour?

Post by afan » Tue Sep 18, 2018 9:21 am

bsteiner wrote:
Tue Sep 18, 2018 7:45 am
Depending on the situation, lawyers are sometimes willing to act as trustee at their usual hourly rates.
That is fascinating. I would have thought the liability concerns raised by gotlucky would have required the lawyers to charge a substantial minimum annual fee, on top of whatever they bill for legal work. The administrative chores, most of the time, could be minimal. Perhaps accounting for an hour or two per year? Most of that work would not require an attorney and would be handled by an office assistant, bookkeeper or some such. Even at the rates charged by a top estates and trusts attorney at a big firm in the middle of Manhattan, that would be low compared to either the flat fee trustees in the asset protection states or a low cost trustee like Vanguard.

Does this revolve around the lawyer making a highly informed individualized decision that the particular trusts for which they are willing to serve as trustee are unlikely to create any actual liability problems?

When we did our most recent round of estate planning our attorney mentioned that she did serve as trustee when there were no suitable alternatives. It sounded like a small part of her business that she was not pushing to expand. She happily gave advice on a number of banks to consider. She said that she did not hold herself out to be an investing expert and that she would not take on the liability of being responsible for that. So someone else would do the investing. We did not get into costs for her to be trustee, but she endorsed the idea of using Vanguard.
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