This does not usually include attorney's fees … McMahon v. Krapf, 323 Mass. § 18-6-1 Reasonable compensation (not UTC) South Carolina SC Code § 62-7-708 Reasonable compensation What is Reasonable? Unlike in some states, where the executor fees are fixed amounts equal to a percentage of the probate estate, in Massachusetts the executor is entitled to “reasonable compensation” for services rendered. It is not uncommon for an attorney to act in multiple roles and the Court acknowledged that being one’s own attorney may be efficient. Federal laws - In addition to state law regulations, the federal government has laws that govern the operation of homeowners' associations, condominiums, and other residential properties in the state of Massachusetts.. Massachusetts Condominium Statute, Mass. In sum, trustees should take a fee annually, with full disclosure (and, if possible, written consent from the beneficiaries) and in accordance with the rules of fiduciary accounting. Brad Gallant is quoted in an article, "My Sister-in-Law Died by Assisted Suicide: Connecticut Braces for Aid-in-Dying Bill," published by the Connecticut Law Tribune. A violation of this is a breach of trust. The Court in Corcoran v. Thomas, 6 Mass. However, there are numerous pitfalls for an attorney when setting and collecting his or her fees for serving as a fiduciary. A trustee is entitled to “reasonable” compensation. In 1948, the Supreme Judicial Court in McMahon v. Krapf, 323 Mass. Trusts in Massachusetts are governed by the Massachusetts Uniform Trust Code, codified at G.L.c. The private right of action under Massachusetts Civil Rights Act (MCRA) § 11I explicitly provides for recovery of reasonable attorney fees for “[a]ny aggrieved … persons who prevail in an action” under the MCRA. Similarly, the Massachusetts Uniform Trust Code (“MUTC”) states that “[i]f the terms of a trust do not specify the trustee’s compensation, a trustee shall be entitled to compensation that is reasonable under the circumstances.” M.G.L. Ct. 1990 (1978), an appellate court held that “[t]he only rule of law is that the fiduciary is to receive just and reasonable compensation for all services performed in his trust.” The average fee is roughly 1%-5% of the corpus of the trust, but it … Section 708. This article first appeared in the BBA’s Trust & Estates Section’s Winter 2009 Newsletter. 2. Change ), You are commenting using your Google account. The will or trust, as the case may be, controls the fees a fiduciary may charge for providing fiduciary services. Sullivan v. Sullivan, 335 Mass. historically, this amount is between 2% and 5% plus all out of pocket expenses. Change ), You are commenting using your Twitter account. Day Pitney remains committed to providing quality legal counsel, while protecting our clients and employees, and transforming our communities into more just, equal and equitable spaces. Determining Fiduciary Fees in Massachusetts ," for Wealth Strategies Journal . In the Grimes case, an expert was presented who relied on fee schedules to attempt to prove the reasonableness of the fees. On the other hand, there are other responsibilities that require the skill and knowledge of an attorney or professional, such as the sale of property, interpretation of a legal document and preparation of an estate or fiduciary tax return, in which it is proper to charge his or her hourly rate. Copyright © 2020 Day Pitney LLP, all rights reserved. HBR Hotlist (Nov. 2, 2020): How to Thrive When Everything Feels Terrible; Our Work from Anywhere Future; What It Takes to Lead Through Exponential Change, and More! Accordingly, to determine what is considered “reasonable,” the fiduciary must look to Massachusetts case law. Courts have determined trustees’ fees by comparing the subject trustee’s fees to those of multiple other trust companies in the area.10 Courts have authorized corporate trustees to receive commissions based on their published fee schedules so long as such schedules are reasonable. AICPA Tax Insider (October 29, 2020): Offer-in-compromise Scams Expected to Increase; 2021 Inflation Adjustments and Tax Tables Issued; Inflation-adjusted Income Ranges for 2021 IRA and 401(k) Plans; and More! The executor fees can also be subject to approval by the probate court. There is no set rate but the amount will vary. Corporate trustees, banks and trust offices very often use fee schedules to charge for their services as fiduciary. Sally P. Schreiber, J.D. (2007). Typically, professional trustees, such as banks, trust companies, and some law firms, charge between 1.0% and 1.5% of trust assets per year, depending in part on the size of the trust. What is interesting to note about the Corcoran case is that the Court specifically did not take into account the general commissions paid to a real estate broker, despite the amount usually paid to others for similar work being one of the factors from McMahon. These fees usually arise when a successor trustee takes over the administration of the trust upon the death or incapacitation of the person who originally enacted the trust. App. The trustee will be paid 1.75 percent on the first $500,000, 1.25 percent on the next $500,000, 1.0 percent on the next $1 million, 0.85 percent on the next $3 million, and 0.50 percent on values over $5 million. Few key cases in Massachusetts guide the fiduciary in setting reasonable fees. HOA LAWS AND REGULATIONS. §7768 Reasonable compensation; added factors a court may consider Rhode Island RI Gen.L. Executor and Trustee Fees You may appoint an executor in your Will to wind up your affairs and distribute your estate on death. Finally, if multiple fiduciaries are serving, each is entitled to compensation in proportion to his or her services. Some grantors choose to limit the fees to a specific dollar amount, while others opt for allowing the payment of reasonable fees based on services rendered and applicable state law. Change ), You are commenting using your Facebook account. There was a concern that the estate was getting billed twice for the same service and Mr. Grimes was charging his hourly rate for “humdrum work,” such as going to the post office. The trustee log should be a chronological narrative specifically describing the activities, decisions, events and circumstances involved with the trustee’s discharge of his duties. On December 10, Dina Kapur Sanna served as a speaker on the panel, "Inbound Planning," at the American Law Institute, Continuing Legal Education Trust and Estate Planning 2020 conference. James M. Lestikow, a partner in the Springfield, Illinois office of Hinshaw & Culbertson LLP, authored the article "Trustee’s Fees: What Is “Reasonable' Compensation?" For example, the executor in McMahon paid unwarranted bills and incurred unnecessary expenditures that were detrimental to the estate. 92 (2013) Explains the concept of decanting trusts. App. The Court’s list included size of the estate, marketable nature of the assets, factual and legal questions involved, time expended, skill and ability employed, … Brunelle v. … c. 190B, § 3-719. Frequently, however, a trust agreement is silent on the issue of Trustee fees, or the trust agreement calls for the Trustee to be paid a “reasonable fee” for his/her services. The statute does not set forth a methodology for calculating "reasonable" trustee's fees or otherwise explain which circumstances should be considered. Executors for MA estates are entitled to reasonable compensation. After all, an executor’s work is often very similar to that of a trustee. : 2021 Inflation Adjustments and Tax Tables Issued (October 26, 2020), Sally P. Schreiber, J.D. Relying on Massachusetts case law to set fees is challenging because much of that case law is based on situations where the actions by the fiduciary were a detriment to the estate or trust. It would be reasonable to point out past history as the usual and customery fee as in the past. Ct. 199 (1978), held that “[t]he only rule of law is that the fiduciary is to receive just and reasonable compensation for all services performed in his trust.” The Corcoran Court then continued by stating that “[e]verything that a fiduciary does rightly and properly is to be paid for….” Id. Sorry, your blog cannot share posts by email. Consideration is also given to the net benefit that may result from the fiduciary’s services. An exception to this might be where the Trust owns real property that stays … c. 203E, §708(a). fees of $60 million on assets that they claimed grew in value to over $2 billion due to their efforts.6 The trustees also submitted the certifications of two expert witnesses opining that, in their experience, the lodestar method is never used to determine trustee fees. Pick a reasonable hourly rate. Bridgewater Global Observations: Beyond the Election: What Doesn’t Change Will Be a Lot More Than What Does (Nov. 3, 2020), Rubin on Tax: A Co-Maker of a Promissory Note Is Not Always Liable to the Co-Signer [Florida] (October 31, 2020). ( Log Out /  ( Log Out /  Trustee’s Skill and Expertise Section 708: Compensation of trustee. 66.] trustee compensation, is a matter left largely to the judge's discretion. For example, an MA estate worth $700K that required 850 hours of effort might generate $19K in … (November 1, 2020), Deloitte: Tax policy implications of a Joe Biden presidency (Nov. 8, 2020), Post Election Webinars/Newsletters Etc. Determining Fiduciary Fees in Massachusetts," forWealth Strategies Journal. ( Log Out /  However, the instrument often simply states that the fiduciary is entitled to reasonable compensation. The Court held that “there is no rule of law and no principal of right by which such commissions are to be charged or allowed without regard to the rendition of actual services therefore.” Grimes, 22 Mass. The Court prevented the executor from taking the broker’s fee because, in applying some of the factors enumerated above, such as the time expended and skill involved, the services performed by the executor in selling the property did not warrant the fee. In Massachusetts, trustee fees are governed by the terms of the trust document and by accepted standards of reasonableness within the Commonwealth. However, such percentage schedules are not appropriate for an individual fiduciary. If an attorney would like to charge a fee schedule for his or her services as a fiduciary, that should be discussed when the controlling document is drafted and made a part of such instrument. Does a Massachusetts executor charge a % of the estate or an hourly rate? A trust is a legally binding arrangement whereby a settlor transfers title to another person, the trustee, for the benefit of a third, the beneficiary. Post was not sent - check your email addresses! An attorney acting as a fiduciary will get called on to perform many different tasks. Fill in your details below or click an icon to log in: You are commenting using your WordPress.com account. Amy Lonergan and Joshua Miller, managing director of Atlantic Trust, co-authored an article, "What is Reasonable? If the instrument is silent as to the amount of fiduciary fees charged to the estate or trust, the attorney must look to the relevant statutes and Massachusetts case law to determine how much he or she should charge for serving as the fiduciary. - Answered by a verified Estate Lawyer ... realize that if the fee is contested by a beneficiary you will have to justify your fees to the court. The reader should first read our two articles on Wills and Trusts and the Irrevocable Living Trust before reading further. These standards are similar to those used to establish the reasonableness of legal fees. In some cases, it would be more appropriate for the executor to hire someone to perform the work than to do it himself and charge his hourly rate. With the increased use of the Intervivos Trust as the standard “middle class” estate plan, a typical question that arises is how the Trustees are paid. For example, if the fiduciary mows the lawn at the decedent’s house, he or she should not charge his or her standard rate. For more information, please visit our COVID-19 Resource Center | Racial Justice and Equity Task Force. (2020), Venable Post-Election Series: Election Night Discussion (Nov. 4, 2020). 118, 123 (1948). App. What would a reasonable fee be for a Massachusetts executor or trustee? at 123. Trustees’ fees A trustee’s fee is the amount the trust pays to compensate the trustee for his or her time. Executor’s or administrator’s fee: Pay yourself your executor’s fee, which must be reasonable. Probate Stars: Can You Vote With A Power of Attorney? Oregon ORS 130.635(1) Reasonable compensation; fees paid to third party performing trustee functions may reduce trustee fee Pennsylvania 20 Pa. C.S. The Court in Grimes also noted that no special skills were required, the case was not complex, it was a small estate and Mr. Grimes did not produce an appreciable benefit to the estate. The Court’s list included size of the estate, marketable nature of the assets, factual and legal questions involved, time expended, skill and ability employed, amount usually paid to others for similar work and results accomplished. Also, in Corcoran v. Thomas, 6 Mass. As a general rule, if the Trustee is also investing the trust assets, the percentage will be higher than if the Trustee is simply managing and distributing the assets. These cases do not involve the situation where an additional fee is warranted because the actions by the executor or trustee provided a windfall. What exactly is “reasonable compensation” though? If you’d like a bit more (free) help understanding the estate settlement process, you can answer a few simple questions and get a free custom executor plan here on Executor.org.. And, here are the executor fees by state, so you know how much compensation is reasonable. Trust instruments, however, rarely specify the level of trustee fees, other than to note that trustees are entitled to “reasonable compensation.” Attorney’s and accountant’s fees: For preparation of Form 706 and Form 1041, and for the probate accounting. § 736.0708(1), Fla. Stat. If a will fails to address the issue of compensation, the Massachusetts Uniform Probate Code (“MUPC”) contains a default provision, which states that “[a] personal representative is entitled to reasonable compensation for services.”  M.G.L. Under state law, fees are usually calculated either as a percentage of the total value of trust assets or a percentage of the transactions you make (the money that goes in and out of the trust). April Condon, Vice Chairwoman of the Stamford Partnership, was featured in the articles, "Stamford Partnership relaunches professional development program," and "Stamford Partnership revives leadership program for Fairfield County professionals.". Few key cases in Massachusetts guide the fiduciary in setting reasonable fees. Disputes over trustee fees can be hotly contested and disrupt efficient administration of the trust. If a testator or settlor appoints a corporate fiduciary with a fee schedule, there is an inference that the fee schedule was known and agreed to. Trustees are entitled to “reasonable” compensation whether or not the trust explicitly provides for such. This would be a typical benchmark for individual Trustees to base their Trustee fees on and most Courts uphold a minimum annual Trustee fee of 1% to be reasonable by default. For an attorney in Massachusetts, serving as a personal representative or trustee (“fiduciary”) for a trust or estate can be a rewarding and fulfilling role. None of these factors alone is decisive. Ct. 439 (1986), Mr. Grimes was acting both as the executor and the attorney for the estate. 118 (1948), enumerated the factors to be used in determining reasonableness of trustee fees. Trustee fees are fees paid to the person or entity acting as the trustee of a living trust on someone's behalf. Updated April 2016. To achieve this, the trustee must use reasonable care, caution, and skill, and they must administer the assets solely in the interests of the beneficiaries. 268 (1957). costs of the litigation and reasonable attorneys' fees in an amount fixed by the court. If you need more help deciding if you should accept compensation for serving as executor, read this guide.. Compensation of trustee (a) If the terms of a trust do not specify the trustee’s compensation, a trustee shall be entitled to compensation that is reasonable under the circumstances. This standard fee also serves as a base rate for relatives or close friends of the trustor that serve as the trustee because laws assume he or she will be performing the same duties that a … :The statute governs the formation, management, and operation of … [Text of section applicable as provided by 2012, 140, Sec. Among all the factors from McMahon, time expended has been determinative in calculating reasonable fees for an attorney acting as a fiduciary. Chuck Cavanaugh (Citi Personal Wealth Management): Federal Estate Tax Exemption Is Set to Expire – Are You Prepared? Still others leave their successor trustee a specific bequest instead of a fee. The determination of how the factors are applied to the particular facts of the case at hand rests largely in the discretion of the probate court judge. https://elder-law.com/special-needs-trustee-fees-set-corporate-fee-schedule In addition to making payments to the beneficiaries, as trustee, you’re also responsible for paying the expenses you incur in administering the trust. The primary expenses include trustee’s fees, investment advice, accounting fees, and taxes. However, in reviewing Mr. Grimes’ time records, the Court took issue not only with the amount of time Mr. Grimes spent on various tasks, but that he did not separate out his time between his role as executor and his role as attorney. In order to substantiate a claim for reasonable trustee compensation a trustee should keep a detailed trustee log together with any underlying source documents. 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