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Do Trustees Receive Payment for Administering a Trust in Vermont?

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When you decide to include a trust in your Vermont estate plan, one of the most important choices you will make is selection of Trustee. The Trustee holds the responsibility of overseeing the trust, protecting the assets, and carrying out the instructions you provide in the trust agreement. Acting as Trustee involves careful management, legal obligations, and ongoing communication with beneficiaries. One question many people have during the planning process is whether a Trustee is entitled to payment for the work involved. To help answer that question, the attorneys at Unsworth LaPlante, PLLC explain how Trustee compensation works and what you should consider before naming someone to this role.

The Duties and Responsibilities of a Trustee

A trust is a legal structure where the creator, known as the Grantor or Settlor, transfers assets to a Trustee to hold and manage for the benefit of one or more beneficiaries. The Trustee acts as manager of those assets but must use them in accordance with the trust’s terms and in the best interests of the beneficiaries. You may appoint a family member or friend, or you may choose a professional Trustee such as a bank, trust company, or attorney as the Trustee of a trust you create. While trust administration can be straightforward, for more complex or high value trusts the work can be substantial. Moreover, Trustees in Vermont must act as fiduciaries, meaning they have a legal duty to manage the trust prudently and loyally. Although the scope of duties can depend on the nature and size of the trust as well as the needs of the beneficiaries, some of the tasks a Trustee may be expected to handle include:

  • Maintaining detailed financial records for the trust
  • Filing any required state or federal tax returns
  • Communicating regularly with beneficiaries
  • Making investment decisions that comply with Vermont’s fiduciary investment standards
  • Resolving disagreements between beneficiaries
  • Managing trust-owned real estate or business interests
  • Distributing income or principal as directed by the trust

Compensation for Trustees in Vermont

In Vermont, Trustees are typically entitled to “reasonable compensation” for their services unless the trust agreement explicitly states otherwise. While Vermont state law provides a general right to be paid, the best practice is to address the topic of compensation directly in the trust agreement. Doing so avoids misunderstandings between the Trustee and the beneficiaries and provides clear expectations for all involved. Because Trustee compensation can be determined in several ways, the appropriate structure often depends on the complexity of the trust, the type of Trustee appointed, and the anticipated workload. Common methods include:

  • Fixed Annual Fee: Some trust agreements specify a flat yearly payment. This approach works well for simpler trusts where the Trustee’s responsibilities are predictable. It offers clarity to everyone and can be particularly effective when an individual family member serves as Trustee.
  • Hourly Billing: In situations where trust management is unpredictable or requires intensive oversight, an hourly rate may be more appropriate. This method ensures that the Trustee is compensated in proportion to the time invested. Hourly billing is often used when the trust owns investment portfolios, income-producing real estate, or other assets that require active management. Even family members acting as Trustees in Vermont may be paid hourly, although some choose to waive payment for personal reasons.
  • Percentage of Trust Assets: Professional Trustees, such as banks and trust companies, often base their fees on a percentage of the trust’s total value. In many cases, this percentage decreases as the trust grows in size, creating a tiered structure. For example, the first portion of the trust’s value may be billed at one percentage rate, while higher amounts are billed at lower rates. In addition, Trustees may receive extra compensation for handling unusual or challenging matters, such as legal disputes or the sale of complex assets.

Defining “Reasonable” Compensation

Vermont law does not set a fixed dollar amount for Trustee payment. Instead, it allows for compensation that is considered “reasonable” based on the circumstances. Factors that may be considered include:

  • The overall value of the trust
  • The complexity of the assets involved
  • The level of skill and expertise required
  • The time and effort spent on trust administration
  • Whether the Trustee is also a beneficiary
  • The results achieved in managing and preserving the trust

While courts in Vermont have the authority to review and adjust Trustee fees if disputes arise, leaving Trustee compensation open to interpretation can lead to tension between the Trustee and the beneficiaries, slow down administration, increase legal costs, and create unnecessary stress. To avoid problems, it is best to set clear compensation terms within the trust agreement when you create the trust.

Do You Have Additional Questions about Trustee Compensation?

For more information, please attend one of our upcoming FREE seminars. If you have additional questions or concerns about Trustee compensation and your Vermont trust, contact an experienced Essex Junction estate planning attorney at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.

Ellen LaPlante
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