by John Darer® CLU ChFC MSSC RSP CLTC
Do you know how to compare the fees charged for a settlement preservation trust, settlement planning trust, recovery management trust or a special needs trusts? How do you distinguish the cost structure of two or more trustees? In this and future posts and podcasts we will examine aspects of the decision to select a trustee for your trust. This post helps to sort through the fees and charges that could be directly or indirectly incurred by trust beneficiaries.
Yes, "How Much is That Trustee in the Window"? Start humming while you're reading...
There is no question that where they make sense and , if necessary, have been court approved, settlement trusts add value to the settlement planning process. They can provide spendthrift protection, liquidity, flexibility, are an alternate means to create periodic payments when constructive receipt has occurred and, if used in conjunction with a structured settlement, may act as a receptacle to receive periodic payments on behalf of the trust beneficiary to protect them from from hangers-on.
Trust fees fall into these three general categories:
1.Account Level Trustee Fees
Cost associated with the trustee discharging his/her/ its fiduciary duties. What is being advertised in published fee schedule and reflected on account statements in transaction activity. These are fees that you can figuratively see, smell and touch. Is there a minimum annual fee?
2. Investment Costs (note: could be one , all or some)
Costs inherent in the investment choices made with the trust assets, whether through common trust funds, mutual funds or money managers assigned to a specific asset class.
A. Outside advisory fees
Cost associated with hiring outside advisors and experts ( is it out of trustee's pocket or out of client's pocket)
B. underlying investment vehicles loads, investment charges, within the vehicle and netted out of performance...not on account level.
Note: account level investment charge would show up on statements
C. account level fee charged by trustee or investment advisor
3. Additional Miscellaneous charges
- Fee to prepare tax return
- Special asset charges
- Check charges
- Front end load just to set up trust (have seen them range from 2%-4%) One vendor refers to this charge as a "funding fee"
- Fees to manage real estate