Disputing Trustee Charges – The Importance of Acting Quickly

If you are the beneficiary of a trust, you might have questions about your trustee and the charges they are receiving connected to running your fund. Perhaps it doesn’t seem right, or you believe they shouldn’t be receiving these payments. If you feel this way, the most appropriate solution may be to challenge trustee charges and expenses.

In cases like this, it is important not to delay in gathering all the information to make a claim, otherwise you may not be able to change the situation. Read our article to find out which types of trustees can receive payments and how you can be entitled to contest them.

Is a trustee entitled to charge for their service?

When it comes to trustees, a few things must be taken into consideration. Firstly, whether a trustee is entitled to charge for their services depends on whether they are a professional trustee. This means that when a trust is set up, the person creating the trust (known as the settlor) will choose trustees to manage the trust. They can either choose friends or relatives (called lay trustees), or professionals like solicitors or accountants.

In general, trustees should not be paid for their services. This is because it is important that trustees don’t benefit from the trust property, as this could create a conflict of interest. However, there are some exceptions to this rule. For instance, if the trust deed specifically allows for a professional trustee to be paid, then they can receive compensation for their work.

If the trust deed doesn’t have an explicit clause allowing for a professional trustee to be paid, the trustee can still receive reasonable remuneration if the other trustees provide their written consent. However, it is worth noting that the trustee’s profession should align with the needs of the role. For example, if they are a solicitor with expertise in trusts and estates, then they are generally entitled to charge for their services.

Regardless of whether they are a professional or lay trustee, it is important for the trustee to provide details of their fees to other trustees and principal beneficiaries before they take on the role. While there are professional trustee fees, lay trustees should always act free of charge.

Is a beneficiary entitled to challenge trustee charges?

A professional trustee should only charge ‘reasonable remuneration’ for their services. If their charges exceed what is reasonable, a beneficiary is entitled to object. However, it is crucial to raise an objection as soon as possible. Otherwise, this may lead to problems when contesting the charges.

Case Study:

In the case of Pullan v Wilson [2014] EWHC 126 (Ch), it was held that while the trustee’s hourly rate exceeded what was appropriate, the beneficiary’s failure to object until two years later was seen as accepting of the charges which meant that he couldn’t challenge them.

What are typical trustee fees?

Different trusts require different types of maintenance and upholding. Although your initial thought might be that a trustee is being overpaid for a service, different aspects must be taken into consideration, as costs are relative to the trust and there is no one-size-fits-all in terms of fees.

At Burt Brill & Cardens, for annual trust maintenance within the lower level of administration and organisation, we would charge from £750 +VAT. This would include preparing the trust account as well as organising the tax return. For higher-level administration, annual fees from about £1250 +VAT are to be expected. Trust funds that are in this level are usually of higher value, have multiple beneficiaries or need more complex maintenance from a solicitor. If the trust has complex investments, a cross border element, overseas trustees or regular communication between trustees  and beneficiaries then the fees are likely to be higher. please talk to us for more information about what we might charge.

Additional fees can include creating a deed of appointment and/or retirement, as well as potential costs if there is ever a changeover of trustees. Some solicitors can charge additional hourly fees if advice or extra maintenance is needed.

Emily Shearing, Head of Wills & Trusts, suggests that a warning sign to look out for is if the trust management fees are disproportionate to the amount of money in the trust fund. Moreover, a professional trustee’s fees should be based on the nature and value of the services they are providing. If the work does not require a high level of skill, their charges should reflect this.

Trustee Embezzlement

Trustee embezzlement refers to the act of a trustee misappropriating or stealing funds or assets that have been entrusted to their care. It occurs when a trustee intentionally diverts or misuses those assets for their own personal gain.

Trustee embezzlement is a serious breach of duty and a violation of the trust placed in the trustee. It can result in financial loss and harm to the beneficiaries and legal consequences for the trustee, including civil and criminal penalties. If you think that your trustee is abusing their position of trust, reach out to us as soon as possible.

How to challenge charges made by a trustee

If you are concerned that a trustee is charging in excess of what is reasonable, you are advised to raise an objection as soon as possible. Don’t agree to their rates and let them know about your concerns immediately. If you don’t complain and allow them to continue working, it might be seen as agreeing to their high fees. A trustee is required to always act in the best interests of the trust. Where you believe they are charging excessively, you should put your concerns in writing to them, requesting that they reduce their fees to a reasonable level.

If a trustee is guilty of overcharging or other breaches of trust, you may be able to have them removed.

What should I do?

If you have a lack of clarity about how trusts work, or you are unhappy with a trustee and believe too much is being paid in fees, contact us today. Acting quickly is important and we need to make sure we can help you as soon as possible.

To speak to one of our trust specialists, ring us on 01273 604 123, email us at enquire@bbc-law.co.uk or fill in our enquiry form.