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Barrister
Barrister, Attorney
Category: Estate Law
Satisfied Customers: 24547
Experience:  14 yrs estate law, real estate. Wills/Trusts/Probate
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What fee is the trustee or executor entitled to under new jersey

Resolved Question:

What fee is the trustee or executor entitled to under new jersey guidelines? Are the tiered percentages based on overall estate values? Do the fees differ between an estate and trust? the is new jersey specific.
Submitted: 4 years ago.
Category: Estate Law
Expert:  Barrister replied 4 years ago.

Hello,

 

There does not appear to be any set statutory amount that a trustee is entitled to in NJ. If the trust says that a trustee is to serve with no compensation, then none is allowed. If it is silent, then the trustee can be compensated, as long as it is "reasonable" based on the work performed.

.

A fiduciary relationship exists between a trustee and the trust similar to the attorney-client relationship. Restatement (Second) of Trusts § 2 comment b (1959) (stating that "Fiduciary relations include not only the relation of trustee and beneficiary, but also, among others, those of ... attorney and client."). Like the attorney-client relationship, a trustee's fiduciary relationship is based on the utmost trust. See In re Koretzky's Estate, 8 N.J. 506, 528, 86 A.2d 238 (1951) (noting that trustee's most "fundamental duty" is his duty of loyalty to trust's beneficiaries)

.

Based on my research into the caselaw, there are certain general principles that can be applied. A court may award compensation to a trustee only for work that is reasonably related to furthering a trust's interests. A court may award compensation to a trustee only for work that is reasonably related to furthering a trust's interests. The trustee cannot claim compensation for work in connection with the trust estate which is unnecessary and self-imposed, resulting from wrongful acts in management of the property. Also, the trustee cannot claim compensation for personal services rendered.

.

Moreover, commissions are allowed to a trustee only as compensation for services actually rendered in the execution of the trust. Except insofar as the trust instrument may otherwise provide or contemplate, if there has been no service performed or liability incurred by a trustee, he or she is not entitled to compensation merely because of the fact that he or she is trustee. A trustee has no right to make even reasonable charges for matters which the decree creating the trust provided were not to be compensated.

.

The question would be what would be considered reasonable? Typically, you would examine the task and see what a professional would charge to perform it and charge a percentage of that. For example, if an accountant charged $100/hr and you were doing taxes or accounting for the trust, I would opine that $60-75/hr would be reasonable.

.

The final determination would be made by a judge if a beneficiary decided to challenge the compensation by filing a suit in probate court.

.

Under New Jersey law, the Executor of an estate is generally entitled to the following commissions:

a. 6% on all estate income;
b. 5% of the estate up to $200,000;
c. 3.5% on excess above $200,000 up to $1,000,000;
d. 2% on excess over $1,000,000 or such other percentage as the Superior Court may determine.

.

.

thanks

Lawpro

If I have answered your question, PLEASE CLICK THE GREEN "ACCEPT" button NOW, so that I receive credit for my work. Bonuses are optional and greatly appreciated. If you need additional clarification on this question, just click "Reply" and I will be happy to help you. Please give me as much detail as you can so that I can respond after receiving all the relevant details.

Customer: replied 4 years ago.

Let me clarify now that your've given me the basics:

Situation is an estate was in effect from dod in 2005 to 2009 and an executor was named to carry out their responsibilites.

1) during this 5 yr period executor never rec'd an compensation from the estate. there is no stipulation in the will limiting his compensation.

 

2) with regard to INCOME rec'd and reported via fed from 1041 over the past 5 years there appears to be apx. 150,000. the majority of this (100,000) was a consequence of an ira distribution. Question here is: Is the ira distribution considered income and therby subject to 6% commission on all income?

 

3) since the 100,000 in ira distribution is now part of the overall value of the estate value, must one exclude this amount when determing executor's addtional entitlements to commisions at the 5% rate up to 200,000?

 

4) in 2009 a final estate tax return was filed, concurrently a trust opened on 1-01-09 and all assets were transferred from the estate to the trust. the executor and trustee are one in the same.

 

5) in all likelyhood the trust will hold assets and generate modest income for many many years since the will calls for distributions to grandchildren once they reach age of majority.

 

6) question in the regard is: Can trustee establish a current overall value this year 2010, and is the trustee entitled to same commision structure as an executor under New Jersey law? Also can commissions be take in increments each year providing detailed records are kept to insure compliance. no commission or compenation has ever been taken by executor or trustee to date. Please keep in mind the 100,000 in IRA income was reported while this considered an estate, no commssions were taken by executor but NOW that a FINAL estate tax return has been filed can the former executor who is now the trustee retro and take commssions relative the the large IRA distribution even though estate was closed and all was tranferred to the trust??

Thanks so much for your expertise in these matters.

Expert:  Barrister replied 4 years ago.

2. Unless it was a Roth IRA, distributions to any beneficiary (including an estate) are considered income with respect to a decedent.

 

3. Yes, any income that the Exec has already been compensated for should be excluded from further claims. You can't double dip.

 

6. The compensation of a Trustee (Executor of a Trust) is not set by any NJ law and should be "reasonable" based on the duties performed. The Trustee can establish a "baseline" amount of the total assets in the Trust for compensation purposes.

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Execs have a set fee schedule, Trustees do not.

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There is no requirement that Trustee compensation be taken in a lump sum and can be broken out into any increments as long as it is documented in an "accounting" of the inflows and outflows of Trust assets. However, if the Trustee takes a lump sum compensation, it would be based on the value of the assets at the time of distibution. So if there were only stocks in the fund worth 100K at the end of the year when the Trustee took a yearly lump sum, but they were worth 150K at the beginning of the year, the Trustee could only base compensation on the 100K. So to even out any fluctuations in asset valuation, most Trustees take distributions on a monthly or quarterly basis.

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If the Trustee took compensation that the beneficiaries considered unreasonable, the beneficiaries can file suit in Probate court to have a judge make a determination of whether the fees were reasonable or not.

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Once the estate has been closed and settled, any claims against it would be considered to have been settled. So the Executor would not be able to retroactively claim any fees as they should have been presented along with any final accounting and on any final estate tax return.

.

The Executor could file a "Nunc Pro Tunc" motion for fees with the probate court in an effort to claim fees that were accidentally omitted. This is an motion for an order which refers to changing back to an earlier date of an order, judgment or filing of a document. Such a retroactive re-dating requires a court order which can be obtained by a showing that the earlier date would have been legal, and there was error, accidental omission or neglect which has caused a problem or inconvenience which can be cured.

.

.

thanks

Lawpro

 

If I have answered your question, PLEASE CLICK THE GREEN "ACCEPT" button NOW, so that I receive credit for my work. Bonuses are optional and greatly appreciated. If you need additional clarification on this question, just click "Reply" and I will be happy to help you. Please give me as much detail as you can so that I can respond after receiving all the relevant details.

Customer: replied 4 years ago.

thanks, XXXXX XXXXX clarified most of my questions.

I do have one final question.

Since a FINAL FED 1041 HAS BEEN FILED in 2009, can it be ammended for the purpose of inclusion of exceutor's commisions? I ask, since no commissions were ever taken by Executor while estate was in effect and you indicated the same commssion structure will NOT apply under the trust. My concern is if the trustee decides to receive compensation in the 2010 tax year at the estate commssion structure allowed in New Jersey but pulls the funds from what is NOW considered the Trust would that compensation cause concern or repercussions from the beneficiaries? I do not expect the compensation to the trustee to more than apx 25,000 on estimated asset and income levels of a about 400,000. Please keep in mind the Executor and the Trustee were and are the same person. Said compensation of 25K appears to be resonable given the circumstance and It would be preferrable to simply compensate the trustee from the TRUST in 2010 rather than ammend the 2009 estate tax return for this purpose.

Thanks you once again.

Expert:  Barrister replied 4 years ago.

Yes, you can file an amended tax return to reflect the compensation assuming that your nunc pro tunc motion was granted by the court.

.

I think that if you didn't take the fee out as executor, than you would be entitled to do so as Trustee by simply including the 100K as Trust assets instead of income to the estate. As long as your compensation as Trustee is "reasonable" I don't see any challenges coming from any beneficiary.

.

 

thanks

Lawpro

 

 

If I have answered your question, PLEASE CLICK THE GREEN "ACCEPT" BUTTON NOW, so that I receive credit for my work. Bonuses are optional, and are greatly appreciated. If you need additional clarification on this question, just click "Reply" and I will be happy to help you. Please give me as much detail as you can so that I can respond after receiving all the relevant details.

 

Barrister, Attorney
Category: Estate Law
Satisfied Customers: 24547
Experience: 14 yrs estate law, real estate. Wills/Trusts/Probate
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