If a family member or close friend has asked you to be the trustee or successor trustee of a trust, it’s critical that you find out more about the trust and what that role would require before you agree. There are multiple types of trusts – and even more types of beneficiaries.
Some trusts are relatively uncomplicated to administer. For example, someone might establish a trust to provide money for a child when they reach adulthood. As trustee, you might only need to disburse a designated amount or percentage of the assets to the beneficiary on a schedule or based on specific markers, like age or accomplishment. If the assets are in instruments like money market accounts or index funds, they may require little oversight.
Many trusts are intended to increase significantly in value over time to provide lifetime income to a beneficiary. Managing this type of trust may require regular monitoring and modification to ensure that the assets are performing well.
All trustees have fiduciary duties to the trust and beneficiary(ies). They’re generally responsible for things like filing taxes and other regulatory responsibilities.
Like executors, trustees are entitled to receive compensation for their time and work. That fee and how it’s paid should be clearly stated in the trust document. It may be a set annual fee, a percentage of the trust’s value or the trust may be billed by the trustee based on their hours of work.
What does Kentucky law say?
If the grantor who established the trust provided no trustee fee information in the document, trustees are paid according to state law. Kentucky law states only that a trustee “is entitled to compensation that is reasonable under the circumstances….”
Whether trustee compensation is established upfront or not, the law states that it can be modified by a court if “(a) The duties of the trustee are substantially different from those contemplated when the trust was created; or (b) The compensation specified by the terms of the trust would be unreasonably low or high.”
Whether you’re weighing accepting the job of trustee and what compensation is fair, or you want to seek a modification of your established compensation, it’s smart to learn more about how trustee compensation works in Kentucky. Getting experienced legal guidance can help.