Serving as a Trustee in New Jersey takes a lot of work. Depending on the type of trust (including special needs trusts or a minor’s trust) the role can become a full-time commitment. In fact, there are companies whose sole existence is to serve as trustees. Decisions must be made about all sorts of issues, including distributions to beneficiaries, selling or buying property, fees to charge, and advisors to hire.
We are often asked by our clients; what are the trustee fees in New Jersey? The trustee, the individual who establishes a trust, and the trust’s beneficiaries prefer to know exactly how much of the trust’s resources will be used for administration.
In the trust dynamic, the principal sets the terms. If the trust document has not yet been drafted, the grantor can expressly state the compensation a trustee will receive. If the trustee does not feel the compensation is worth their time and effort, it is their right to refuse to serve. The types of compensation specified can be an hourly rate, a flat rate per year, or a combination of both. Some trust documents may even stipulate that trustees serve with no fee. Most often, a trust will include a term specifying that a trustee shall receive ‘reasonable compensation’
If however, the grantor has failed to specify the compensation, the New Jersey legislature has provided for a statutory fee schedule. However, this does not apply to corporate fiduciaries. A trustee’s fees are split into two amounts: an income commission and a corpus commission. In most cases—unlike an executor—a trustee takes an annual fee rather than a one-time lump sum.
Trustees are entitled to a 6% fee on all income received by the trust annually.
Trustees are entitled to an annual commission on the corpus of the trust. This includes money that qualified as income in previous years, and has since been reinvested. The statutory fee for a trust corpus is .005% of the first $400,000 and .003% on the value of the corpus that exceeds $400,000.
So for example, the corpus commission with a value of $3.5 million would be:
|$400,000 x .005% = $ 2,000|
|$3,100,000 x .003% = $ 9,300|
|Annual Corpus Commission = $ 11,300|
Imagine a $10 million dollar corpus, invested with a 7% annual return. A trustee would be entitled to (assuming no distributions):
|$400,000 x .005% = $ 2,000|
|$9,600,000 x .003% = $ 28,800 (Fee on Principal)|
|$10,000,000 x .07 x .06 = $ 42,000 (Fee on Income)|
|Annual Commission = $ 72,800|
In addition to income and corpus commissions, when the trust is terminated, the trustee is entitled to a percentage-based termination fee. This fee depends on the value of the trust and amount of time they served as trustee prior to termination. Finally, the above fees and percentages change based on the number of trustees serving. The above assumes that only one trustee is serving. If more than one trustee is serving, a small percentage is added to the overall commission, to be divided among the serving trustees.In our blog, we will provide examples from case law of what happens when a Trustee charges a commission above these limits in New Jersey.
If you have questions about trustee fees in New Jersey or any other estate planning concerns contact our office for a free consultation.