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Friday, January 28, 2011

What does a trust company charge to administer an estate?

A reader has asked me what a trust company charges. Since I work at a trust company, I am very familiar with our charges. I am not as familiar with the charges of other trust companies, though I expect that through the miracle of marketplace economics, we are probably similar.

There are two basic scenarios in which a trust company is hired to help. One is where the deceased person named the trust company as executor in his will before he died. I'll talk about that first. The second scenario is where the deceased named an executor such as a family member or friend, and it's the executor who comes to us for help.

In both scenarios, the cost of using a trust company is cheaper than you think.

If we have been appointed as an executor under someone's will, when that person dies we will run the estate according to the will. We don't charge a fee to be named, and we don't charge a fee if the customer changes his mind and decides not to name us. The only time we charge a fee is when we actually do the executor work on the estate.

The fee is a percentage of the estate. Our fees max out at 3.5% on the first $500,000 of an estate. The fees then decrease as the estate gets larger (e.g. it's 3.25% on the next $500,000). To give these numbers some context, I can tell you that in Alberta any executor, even a rookie who's never probated a will before, can charge an estate up to 5%. So you're getting good value when you get someone with tons of experience for 3.5%.

The fee comes out of estate assets. The executor doesn't pay it personally.

In the second scenario, a trust company is asked for help by an executor who is trying to run a deceased person's estate. This is sometimes because the executor is overwhelmed by the amount of work, and sometimes because there are troublesome beneficiaries. Regardless of the reason, executors might want some help while still remaining executors. We call this "Estate Assist".  The cost for this service depends on how much help the executor wants. Sometimes the executor only wants help with one or two things and other times he/she wants us to run the whole show. The price is tailored depending on the needs.

I once met a client in a branch who had flown in from Ontario. She was appointed as the executor of an estate in Alberta but only had one week to take care of matters. Obviously a week isn't going to make much of a dent in an estate. She hired us on an Estate Assist basis. She had had no idea this service was available but it was exactly what she needed. She told me that she was so happy she was going to take out a full page ad in the newspaper that says SCOTIA TRUST IS GREAT!!!

Remember that it never costs money to call a business of any kind to ask about prices, and that includes trust companies. If you're not sure who to call, go into any Scotiabank branch in Canada and ask them for a name and number for the local trust company.

15 comments:

  1. My husband has terminal cancer and to my knowledge has no will and is too cheap to pay for one. Our marriage is less than perfect due to his emotional abuse and complete control of our lives. Our disrespectful adult son who still lives with us is suddenly cozying up to his father and I'm afraid to be left out in the cold. Our home is in both our names. He has a life insurance with my name as beneficiary unless he changes it and which I will need to keep living in the house and the bank accounts are all in his name and I have no idea what he has, including RSP's. What are my rights as his wife of 30 years? I do not work. We live in Ontario.

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    1. Hi there,
      This must be an unbelievably stressful time for you. This is a complex situation but there are some things I want you to keep in mind.

      First, a wife of 30 years cannot by law be totally left out in the cold. You might not inherit everything, but you automatically have the right, as a spouse, to receive support from the estate. This is true whether or not you work outside the home.

      That's the good news. The bad news is that if your husband makes other arrangements to attempt to leave you out, you might end up suing for your rights in court after he passes away.

      Another issue is that of changes your husband might make at the last minute. I am more than familiar with the later stages of cancer and the drugs that are given to control pain. The drugs often render a person unable to deal with finances and documents. Therefore any changes made at the very last minute - whether changes to bank accounts or insurance policies - might be suspicious.

      This means that last minute changes are sometimes seen as having been made because someone unduly influenced an ill person. Again, this is good news legally for you, but only in a lawsuit.

      If your home is held in both of your names as joint tenants, he can't change the title without your signature.

      Hang in there. Maybe he will have more of a sense of responsibility than you anticipate. I hope this works out alright for you, and I hope your husband's suffering is eased as much as possible.

      Lynne

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  2. Thank you Lynne for the great information on your blog. I am single (with a neice and nephew) and have started thinking about how and to whom I will be leaving my estate. My concern (until I read your blog) was the strain I would put my family under in trying to administer a will. Now I have a solution! Thank you so much.

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    1. You're very welcome. It's my goal to offer information and ideas to people to try to give them options. I see so many people, like yourself, who have concerns or questions but are not sure where to get reliable info. Thanks for the feedback.

      Lynne

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  3. I'm the administrator of an estate worth about $4000. These are oil royalties. These can fluctuate quite a bit. I no longer want to be administrator due to mental health and family disputes ( that's saying it nicely). Can I have a trust company administrator the estate?

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    1. Trust companies are willing and able to handle pretty much any kind of trust. Your issue, however, will be their fees. I assume that the $4000 you mention is actually the annual royalty. A fair amount of that would be eaten by the trust company's fees. This might cause further problems with difficult beneficiaries, but at least it wouldn't be your problem anymore. It would be worth calling a couple of trust companies to ask about their suitability.

      Another option is the Office of the Public Trustee. They aren't free, but they may well charge less than a trust company. That is also worth a phone call.

      Lynne

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  4. Wondering about an estate being handled by my spouse and one other sibbling is this, if they hire a trust company can they also charge a executor fee? The trust company is charging the estate aprox 2.5% Also the estate is in Alberta

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    Replies
    1. If the executor has hired a trust company to handle the whole estate, they must reduce their fee accordingly. It is not fair for the beneficiaries to pay double - once for the trust company and once for the executors - for the same work.

      However, if the trust company is only charging 2.5% that does leave some room for the executors to pay themselves for their overall responsibility of handling the estate. Their fee combined with that of the trust company should not exceed 5%. If the estate is relatively simple, it should be even less.

      Lynne

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  5. We live in SK and have 4 children, one child has a learning disability and has a young child. Is it possible to set up some kind of trust where she would receive monthly income from her share of the estate? How would fees work in this situation? Thanks!

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    1. When you say that "she" would receive income, I'm assuming you're referring to your daughter and not your grand-daughter.

      You can leave the share of any of your kids in trust if you want to. There doesn't have to be a medical reason. You can use a trust in your will just because you think it's the best thing to do for your child.

      Assuming that you decide to put your daughter's share in trust, you can determine the terms of the trust, such as giving her a monthly allowance. This has benefits such as keeping the money safe from any husband or partner your daughter might have now or in the future.

      You could state that if your child should pass away before receiving all of the money, it would go to her child.

      If I were writing this trust, before I started I'd want to know more about the learning disability. Plenty of people have mild learning disabilities and they don't prevent people from earning a living. In other cases, it's more severe and has a negative impact on the person's ability to work productively. This is important because if your daughter is disabled due to her learning disability, you have to be much more careful writing a trust. In particular, you want to avoid causing her to lose any provincial government benefits she may be entitled to receive due to her disability.

      Lynne

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    2. I forgot to answer the bit about fees! I assume you're asking what a trust company would charge, since your post is on that thread. A trust company would charge an annual fee for the management of the trust (including the money management and investing, as well as administrative tasks such as filing tax returns). You'd have to call around or do some research to find out what each trust company charges but it would be in the range of 1 - 2% of the money in trust.

      Lynne

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    3. Thanks Lynne for your response. You touched on our concerns about the future but while she functions extremely well her comprehension regarding budgeting will be a huge problem. Her disability does provide her with prov and federal benefits so this sounds like its going to get more complicated than we hoped and feared. She also is the youngest of the 4 so she may outlive her siblings who will provide support for her. What a mess.

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    4. It's not necessarily a mess. Do a bit of research on Henson Trusts, as these are specifically designed to benefit individuals who are receiving disability benefits.

      Lynne

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    5. Thanks again Lynne, we now feel a little more knowledgeable!

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  6. What does a public trustee charge in Saskatchewan that has been appointed as administrator ad litem? I am executor of my brother's estate but his ex girlfriend filed a caveat saying they were common law spouses. I couldn't get a bond (I lost my job) to be the Administrator so a public trustee has been appointed. The trustee wants to sell items but there's over $20,000 in the bank account. I would think that would be enough to pay for the monthly utility bills (average of $100). I have paid taxes and insurance for the last 2 years so there are no outstanding expenses. I'm very upset they want to liquidate things when I figure the money in the bank should be enough. The only real asset is the house and motorcycle.

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