Professional Charitable Remainder Trust Administration and Tax Reporting
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Trust Fees

Should a CRT trustee charge a fee for services? If so, how much? The uniform prudent investors act states that trustee fees should be “appropriate and reasonable” and that trustees are “obliged to minimize costs.” The choice of trusteeship and the amount of fees to be charged is something that should have been clearly understood before the trust was ever created. If the trustee is an organization such as a non-profit or bank/trust company, the trustee fee often will include investment management and administration costs. If the trustee is the donor, the trustee often chooses not to charge any trustee fee in order to preserve trust income or trust principal. High trustee fees can be heavily scrutinized by the beneficiaries.

"...trustees are “obliged to minimize costs.”"

Unlike an organization that specializes in trusteeship with stated fees, an individual trustee will need to document the fee charged. It is a good idea to breakdown the fee by itemizing services rendered or stating the fee as a percentage of trust assets. In deciding whether to delegate, the trustee should carefully examine the total of all fees charged and has a duty to minimize these costs. It is expected that if the trustee delegates duties such as investment management or administration, the trustee will lower its fee.

Administration Fees
If you are a trustee that doesn’t have in-house administration capabilities, then you will need to find a third party administrator. There are quite a few administration services a trustee can choose from. Services range from tax reporting only to full service administration. The fees charged also differ greatly depending on what services are performed. If the trustee feels confident that he/she may safely keep the trust in full compliance themselves, then paying for a tax reporting only service will save a lot of money. If the trustee requires a full service administrator, the annual fees are much higher. Too often trustees pay too much for trust administration services.

"Too often, trustees pay too much for trust administration."

Paying high administration fees annually that include costs for reviewing the trust for compliance may be unnecessary. And even if you are paying that high full service fee, are you confident that the trust will even be reviewed by a qualified tax attorney? Many administration firms advertise how their legal department supports their administration services. But too often a trust only gets a full compliance review if the trust gets escalated to the legal department because of some red flag or concern the account representative has while preparing the trust reports and tax returns. Trustees should be careful when hiring CPA’s that do not specialize in fiduciary returns. Individual trustees often hire the CPA that has been their personal accountant over the years because of their long standing relationship. Many times this results in both the trustee and the accountant being frustrated. The accountant will often spend much more time than they wanted handling the unique reporting requirements and the trustee may become concerned over delays and higher than expected fees.

"...too often a trust only gets a full compliance review if the trust gets escalated to the legal department..."

The following table compares typical administration and reporting fees for a charitable remainder trust among different service providers.

Annual Reporting & Administration Fees by Trust Size
 
$250,000
$500,000
$1,000,000
CRTPro Premier
‹--------------$700 (flat fee) -------------›
Average Third-Party Administrator
$1,250
$2,125
$3,562
Average Trust Company
$1,875
$3,750
$6,000

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