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  1. #1
    Join Date
    Sep 2016
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    Default Trustee's Fees Upon Dissolution of a Trust

    With the passing of the last named beneficiary of a trust, set up approximately 100 years ago, the trustee is planning to dissolve the trust. The trustee has informed the beneficiaries that a fee will be charged as part of the dissolution process. The trustee has proposed using one year's market value ratio as the basis for the fee.

    Would that be a reasonable fee? How would the trustee's fee normally be determined?

  2. #2
    Join Date
    Sep 2005
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    Default Re: Trustee's Fees Upon Dissolution of a Trust

    If the trustee is permitted to receive fees under the terms of the trust, the trust may define how those fees are to be determined. If it does, then the trust's terms will govern the trustee's fees.

    If there is no provision in the trust for how fees are calculated, then the question becomes whether the trustee's fees are reasonable. If the beneficiaries disagree with a fee or proposed fee, their remedy is to seek judicial review (i.e., take the trustee to court).

    Depending upon state law and the facts of the case, a court might find an hourly fee to be reasonable. A court might also find reasonable a fee that is based upon the trust's income or increased market value. For trust that holds a lot of assets, a high fee may be very justifiable. But it is a fact-dependent determination, so there's no hard-and-fast rule for how the court will determine reasonableness.

    The ultimate beneficiaries of the trust -- those who will receive distributions now that the named beneficiaries have passed away -- should consider consulting a lawyer. The lawyer can review the terms of the trust and advise them, under those terms and under state law, of how a court is likely to decide the issue.

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