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Trust Administration: Expenses, Trustee Reimbursement, Accounting, Reports

A principal administrative responsibility of a trustee is to keep a detailed accounting of all trust assets. See Section 456.8-810. To that end, unless the trust instrument provides otherwise, a trustee is required to deliver to beneficiaries/permissible distributees annually and at the termination of the trust a “report of the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee’s compensation, a listing of the trust assets and, if feasible, their respective market values.” Section 456.8.3, RSMo. In addition, a trustee is under a responsibility to keep beneficiaries apprised of material facts necessary for them to protect their interests; this itself may sometimes involve providing updated financial information. Failure of a trustee to provide adequate reports or to keep the beneficiaries sufficiently aware of material facts pertaining to a trust’s administration may constitute a breach of trust meriting trustee removal or damages.

Another related and important aspect of a trustee’s report is his/her compensation for trustee fees. As a matter of practice, a trustee is generally compensated 1-5% of the trust corpus annually. This will vary depending on the size of the trust and whether the trust requires a more active administration. Beneficiaries often have questions regarding how the amount of compensation is determined so it is important for the trustee to adequately explain the methodology for computing trustee fees at all times. With respect to expenses, a trustee “may incur only costs that are reasonable in relation to the trust property, the purposes of the trust, and the skills of the trustee.” Section 456.8-805, RSMo. Furthermore, a trustee is entitled to be reimbursed out of the trust property — with interest when appropriate — for, among other things, expenses that were properly incurred int he administration of the trust. Like with trustee fees, then, it is important for a trustee to itemize and clearly explain expenses and other reimbursements.

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