Who would you trust?
Rod Cunich 3 July 2013
Would you volunteer to pay a death tax calculated as a percentage of the value of your deceased estate if payment was optional? If the answer is yes, don’t continue reading.
Engaging a trustee company to be the executor and trustee of your deceased estate is akin to paying an unnecessary tax. In addition to any fee for service they also levy a commission based on the gross value of your estate. That is, they don’t even take into account the debts owed by the estate when calculating its value for the purpose of charging their commissions. I know of only one trustee company in Australia that advertises fee for service.
So, how much of a burden on your estate might the commission of a trustee company be?
In 2009, the Parliament passed legislation establishing regulation of trustee companies replacing previous state/territory regulation.
One of the key objectives of the law reform was to bring about efficient pricing. For example, the new law placed a cap on the amount a trustee corporation can charge a charitable trust to act as manager or trustee of either: a one-off capital commission of 5.5. per cent of the trust’s assets plus an annual income commission of 6.6 per cent of the trust’s income (a very generous cap by any measure); or an annual management fee of 1.056 per cent of the trust’s assets.
A trustee company may also charge common fund administration fees, fees for returns for any duties or taxes, not to mention fees for generally keeping your account and even sundry fees for photocopying. The law does not prevent a client of a trustee company negotiating different fee arrangements. But try it. I wish you luck.
Are there other options? Yes, plenty. Many lawyer firms, including Slater & Gordon where I work, don’t charge acommission for estate administration services.
Solicitors can carry out these services acting as executors and trustees of deceased estates at an agreed and disclosed fee for service without burdening the estate with a commission. It is not a complicated arrangement and there is no reason it shouldn’t be adopted more widely.