Newsletter icon

Join Our Newsletter

It's the best way to stay up to date on what Jeff's thinking and where he'll be next.
  • This field is for validation purposes and should be left unchanged.

More about Trustees (Trusts/Trustees Series - Part 2)

            My prior article on “Trusting Your Trustee” generated a lot of feedback, so I want to give you more information and clarity.

            One of the questions I was asked is, “Do trustees get a nominal fee for handling this type of fiduciary duty?”  The answer is yes, a trustee should be paid a reasonable fee for their fiduciary duty and their time spent carrying out that duty.  That fee is based on the totality of the circumstances involved, such as the amount of assets being administered, the complexity of what they are doing, the amount of time involved, and the knowledge, skill and experience required to do a good job.

            For example, if someone as a trustee is holding title to a piece of property, and they are not being asked to do anything other than that, not much work is required, and the trustee fee should be nominal.  If, however, the trustee is involved in activities on a weekly basis, that fee can be significant.

            Something that was pointed out to me by my friend Quincy Long is the importance of selecting the correct trustee to serve as a fiduciary when using an IRA-owned trust.  The code is very clear that the trustee will become a fiduciary to the IRA that owns or is the beneficiary of the trust.  This means that they, and often individuals associated with or related to them, can become disqualified persons as to that IRA for future transactions.  While great care should be taken in the selection of a trustee in any situation, it’s even more important in the selection of a trustee for an IRA-owned trust.  This requires a lot of forward-thinking and what-if questions.

            One question that wasn’t asked but should have been is how the trustee is protected.  The trustee is protected in two ways.  First, the Trust Agreement should agree to indemnify and defend the trustee with resources and assets from the trust.  Then, in the typical situation where the trustee of a grantor revocable title holding trust is holding title to a cash-flow-producing piece of real estate, that piece of property should be insured with a property and casualty insurance policy.  The person or entity serving as trustee needs to be a named insured on that policy.

            I hope this gives you some additional food for thought and helps you when determining whether you want to use a grantor revocable title holding trust to hold your property, or if you want to use an IRA-owned trust as part of your overall self-directed IRA investing plan.

Related Posts

Appointment Booking

If you are looking to book an appointment with Jeff, click the button now.