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What are special fees?

When Chen’s grandfather passed away, he granted Chen’s father a life interest in his estate. A commercial property was the only asset in the estate. When Chen’s father passed away in 2023, the property was to be passed on to Chen and his siblings.

The trustee company told Chen that there were outstanding fees of $80,000, and that they could not transfer the ownership of the property until these fees had been paid. The trustee company explained that this outstanding balance was mostly made up of annual management fees from 1987, when Chen’s grandfather died, to when Chen’s father passed away in 2023. This totalled $45,000. The remaining fees were time in attendance charges.

Chen and his siblings paid the outstanding fees. However, Chen complained that the trustee company’s handing of his grandfather’s estate was inadequate, and that it was unreasonable to expect the beneficiaries to pay $80,000. Chen said that many of these fees should have been paid by Chen’s father, rather than being left for the beneficiaries to pay.

Review

The starting point when considering a complaint about estate administration fees is that the trustee company are entitled to be paid for their services. The law states that the trustee company’s fees cannot exceed an amount equal to 5% of the total value of the estate’s assets. As the property was valued at $1,320,000, we found that the trustee company could charge fees up to $66,000.

However, they could also charge a reasonable fee for special services. The trustee company said they had charged approximately $16,800 in special fees. We reviewed these fees, and found that they fell into three main categories, tax services, managing property, and legal service.

We found that the special fees the trustee company charged for their tax services were reasonable. We also found that the special fees relating to the management of the property were reasonable.

Chen disputed several of the fees relating to the management of the property. He said that while his father held a life interest in the property, he caused the estate to incur extra fees. This is because he did not pay certain expenses that he was liable to pay as the life tenant. Chen thought it was unfair for the beneficiaries to pay fees that should have been paid by his father.

We acknowledged that there were expenses that should have been paid by Chen’s father. However, as he did not pay these expenses, the trustee company were entitled to charge them to the estate. We explained that it would be unfair to expect the trustee company to cover the cost of these expenses, as they incurred them on behalf of the estate.

The trustee company said they charged $1,200 for legal services, which they considered to be special fees. We asked the trustee company to explain why they considered these to be special fees, but they had no information to explain why these fees were of a special nature. We said that without evidence to support the charging of special fees, this $1,200 should be refunded to Chen and his siblings.

Resolution

Chen disagreed with our findings and asked us to reconsider. He maintained that the beneficiaries should not have to pay fees that were incurred by his father. We considered Chen’s response, but our decision remained unchanged. Although Chen did not agree, he accepted our final decision.

Insights for consumers and participants

A complex estate, particularly one that dates back many years, will often have incurred quite substantial fees. If there are no cash assets in the estate, the beneficiaries may be expected to pay these fees.

It is important for trustee companies to keep clear and detailed records of the fees they have charged an estate, particularly if they claim that certain fees were of a special nature.