This is actually a question that came up in a Reddit Format, so we’re going to go ahead and go through the question and some of the comments.
Executor and Alternate Trustee – “We’re working with a law firm to create a living trust. We are having a hard time choosing an executor and alternate trustee. Our family is far away and the firm said they could fill those roles. As a trustee, the fee would be one percent of the principal and income. As executory, the fee would be five percenter of income and one percent of the principal. Does that sound reasonable?”
Now, this kind of brings me immediately to a quote going all the way back to that original Jurrasic Park Movie – “Yeh Yeh, your scientists were so preoccupied with whether or not they could, that they didn’t stop to think if they should.”
Well here’s an instance where it’s probably the very last resort where you are going to want a law firm to be the trustee. You have to be at the point where there’s absolutely no one left.
So we looked at a few of the replies to this question on Reddit. Here are my comments on them.
When you are talking about probate work, yes five percent seems to be a standard but again you can get judicial approval to get even more. The fact is as an attorney, you’re probably going to get that five percent and if you want more you will probably be able to persuade a court to get it if it’s in any way reasonable. If in any way the interpretation can be seen as reasonable you’re probably going to get more.
Why is this out there? Well, we had one case where a client’s father passed on, they wanted help with probate and we charge by the hour. We had to get a California attorney involved for ancillary probate, it was mandatory to get an attorney out there. They got five percent of almost $700,000 for clearing one bank account. That’s it. $35,000 for just handling one bank account.
So that percentage can really not be to the client’s advantage, but the point is if this is something that is ongoing, not probate, they are going to be the trustee and it may hold assets in trust for underage beneficiaries for many years, and they are going to be getting that percentage, one percent of the principal and five percent of the income every single year.
Watch the rest of this video to find out more about how a client’s trust became a firm’s AMT here