Can a trustee charge whatever he wants?

The answer is clearly a No and you should not pay exorbitant trustees fees. Trustees are entitled to “reasonable” compensation and state-of-the-art trust document normally explicitly provides for such in a separate charging clause. In order to avoid any potential disagreements between beneficiaries and professional trustees, it is usual in a modern trust for the trust instruments to authorize remuneration in line with the trustee’s usual terms and conditions of business.

It is however often difficult for beneficiaries to determine whether the fees are reasonable. The more so as trustees often argue, whether rightfully or not, that the fee increase is a result of new regulatory requirements.

If you feel that a trustee fee was excessive, we encourage you to do the following:

  • Obtain an overview of the expenses and compare fees between competing trust companies.
  • Check if a fixed fee can be negotiated instead of ad valorem fee (e.g. a percentage-based fee such as 1% on the trust assets).
  • Compare different jurisdictions. Select sound but avoid over-regulated jurisdictions which have become unpractical to operate in.
  • Propose a more cost-efficient restructuring (avoid too complicated structures if not deemed necessary).
  • Verify if the original purpose of the trust still meets its goal or benefit. Trusts in the past were often sold by salespeople like insurance policies.
  • Ensure that the trust assets are still sizeable enough so that it still makes economic sense.
  • Seek for help from independent advisors or accountants who often have a good understanding of trustees fees.
  • If a protector is appointed, he may be entitled to question the fees charged by the trustee and negotiate a reduction.
  • Complain to the ombudsman.
  • Remove the trustee if all else fails.

Our approach

At IAP, we can deliver our services to our customers in the most cost-effective manner due to Switzerland’s efficient regulatory regime. Furthermore, we have a very unique fee tariff. Our annual trustee and activity fees have fixed rates; that is to say that no percentage-based nor time-based fees are charged. Everybody in our company is committed to the highest professional standards. As such it does not matter, who in our office will provide the services and what the hourly rates are of the person involved. Moreover, service items such as the opening of a bank account which often follows a ponderous administrative procedure have a price-ceiling. This makes the trustee costs more transparent and foreseeable. Additional administrative costs only occur and are levied based on activities required.

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