reasonable trustee fees in massachusetts

118 (1948), enumerated the factors to be used in determining reasonableness of trustee fees. What exactly is “reasonable compensation” though? 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. Determine whether the grantor has made any mention of estate trustee fees. The attorney is entitled to receive the fair value of his or her services and the amount charged should be reasonable based on the services provided and the factors set forth in McMahon. An exception to this might be where the Trust owns real property that stays … 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. Consideration is also given to the net benefit that may result from the fiduciary’s services. 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. Id. App. In the Grimes case, an expert was presented who relied on fee schedules to attempt to prove the reasonableness of the fees. Trusts in Massachusetts are governed by the Massachusetts Uniform Trust Code, codified at G.L.c. This does not usually include attorney's fees … For example, an MA estate worth $700K that required 850 hours of effort might generate $19K in … (It should be noted that all of the case law on this topic to date–including the cases referenced below–was decided before the enactment of the MUPC and the MUTC, but such case law is still considered the primary source of interpreting the “reasonableness” standard.). What would a reasonable fee be for a Massachusetts executor or trustee? 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, … 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. 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! 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. Updated April 2016. Morse v. Kraft, 466 Mass. Change ), Click here to sign up for our free Wealth Strategies Journal Email Newsletter. Change ), You are commenting using your Twitter account. Accordingly, to determine what is considered “reasonable,” the fiduciary must look to Massachusetts case law. Section 708: Compensation of trustee. This is not the situation with an individual fiduciary. 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. Executor and Trustee Fees You may appoint an executor in your Will to wind up your affairs and distribute your estate on death. Thus arises a classic confrontation over “reasonable A trustee is entitled to “reasonable” compensation. In Grimes v. Perkins School for the Blind, 22 Mass. App. Corporate trustees, banks and trust offices very often use fee schedules to charge for their services as fiduciary. The trial court determined the trustees committed a breach … For example, the executor in McMahon paid unwarranted bills and incurred unnecessary expenditures that were detrimental to the estate. However, the instrument often simply states that the fiduciary is entitled to reasonable compensation. 118 (1948), enumerated the factors to be used in determining reasonableness of trustee fees. In addition to making payments to the beneficiaries, as trustee, you’re also responsible for paying the expenses you incur in administering the trust. §7768 Reasonable compensation; added factors a court may consider Rhode Island RI Gen.L. : Inflation-adjusted income ranges for 2021 IRA and 401(k) plans (October 26, 2020). 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. These standards are similar to those used to establish the reasonableness of legal fees. The trustee fee statute provides for an award of trustee's fees that are "reasonable under the circumstances" when the trust does not specify compensation. ... then generally the executor's fee is statutory and is a reasonable fee or it can be based on a percentage of the estate if there is a provision in the testamentary instrument concerning 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. 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. 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. 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. For more information, please visit our COVID-19 Resource Center | Racial Justice and Equity Task Force. 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. HOA LAWS AND REGULATIONS. Therefore, when the attorney is charging fiduciary fees, he or she should determine the appropriate fees to charge by applying the factors enumerated in McMahon to the services provided and the results obtained. Re: Massachusetts executor's fee calculator Depends on the size of the estate and the amount of work entailed. Post was not sent - check your email addresses! 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. 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. The primary expenses include trustee’s fees, investment advice, accounting fees, and taxes. Ct. 439 (1986), Mr. Grimes was acting both as the executor and the attorney for the estate. § 18-6-1 Reasonable compensation (not UTC) South Carolina SC Code § 62-7-708 Reasonable compensation 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. The reader should first read our two articles on Wills and Trusts and the Irrevocable Living Trust before reading further. 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. Trust instruments, however, rarely specify the level of trustee fees, other than to note that trustees are entitled to “reasonable compensation.” 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. (November 1, 2020), Deloitte: Tax policy implications of a Joe Biden presidency (Nov. 8, 2020), Post Election Webinars/Newsletters Etc. An attorney acting as a fiduciary will get called on to perform many different tasks. (Of course, a trustee likely will not be entitled to reimbursement of such fees from the trust if the court finds that he or she is liable for wrongdoing.) : 2021 Inflation Adjustments and Tax Tables Issued (October 26, 2020), Sally P. Schreiber, J.D. Finally, if multiple fiduciaries are serving, each is entitled to compensation in proportion to his or her services. Change ), You are commenting using your Google account. Trustees’ fees A trustee’s fee is the amount the trust pays to compensate the trustee for his or her time. (2020), Venable Post-Election Series: Election Night Discussion (Nov. 4, 2020). After all, an executor’s work is often very similar to that of a trustee. Professional trustees rarely charge less than a 1% of the total worth of the estate as a fee. Among all the factors from McMahon, time expended has been determinative in calculating reasonable fees for an attorney acting as a fiduciary. Few key cases in Massachusetts guide the fiduciary in setting reasonable fees. 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. 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. The executor fees can also be subject to approval by the probate court. 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. Also, in Corcoran v. Thomas, 6 Mass. Trustee fees are fees paid to the person or entity acting as the trustee of a living trust on someone's behalf. at 444. 118, 123 (1948). (2007). ( Log Out /  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. 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. In order to substantiate a claim for reasonable trustee compensation a trustee should keep a detailed trustee log together with any underlying source documents. costs of the litigation and reasonable attorneys' fees in an amount fixed by the court. Few key cases in Massachusetts guide the fiduciary in setting reasonable fees. 183A, §§ 1 et seq. These cases do not involve the situation where an additional fee is warranted because the actions by the executor or trustee provided a windfall. The article discusses the considerations and pitfalls for an attorney when determining fees for serving as a fiduciary. 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! Many of the cases involving fiduciary fees, including the cases mentioned above, involve the situation where the results obtained by the fiduciary were unfavorable to the trust or estate. Amy R. Lonergan is counsel in the Individual Clients department of the Boston office of Day Pitney LLP and Joshua S. Miller is a managing director and senior wealth strategist in the Boston office of Atlantic Trust Private Wealth Management. This article first appeared in the BBA’s Trust & Estates Section’s Winter 2009 Newsletter. The will or trust, as the case may be, controls the fees a fiduciary may charge for providing fiduciary services. 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. The amount will vary fees a trustee is entitled to compensation in proportion his... 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