'I have a large bank as trustee, and it will take a large chunk to distribute my estate'
Dear Quentin,
I am a 59-year-old recluse with post-traumatic stress disorder. I have no living relatives and no close connections. I also have a recent cancer diagnosis. I have $900,000 in retirement accounts, for which I have payable-on-death allocations to various charities. I own my home outright, which I am leaving totally to one charity.
I have a large bank as trustee, and it will take a large chunk to distribute my estate, according to my wishes. I am hoping to find a more simple solution - a "hireable" executor to carry out the simple task of distributing my payable-on-death retirement accounts and handing over the keys to my house and car.
What would be the most cost-effective way to carry out these "simple" tasks? I have a well-defined, established revocable trust and will in place. There has to be an inexpensive way - that is, a person or company I can hire to ensure my recipients get the most they can. Thank you for your help. This has been weighing on me heavily.
Planning my Estate
Related: 'I feel like I'm missing something': I'm 68, divorced with two children. I've $750,000 and rent my home. Do I need a trust?
Dear Planning,
You have clearly had a lot of health issues to deal with, and still you have managed to make plans, think ahead and - this is the most impressive part - think of others, too. If you put in the time now to lock up your estate planning, you can direct your energies into different places: focusing on your physical and mental health and doing things that bring you joy, whether it's reading, watching movies or gardening.
I hope you can take this weight off your shoulders and focus on your health and happiness. Make sure you detail how you wish any charitable donations to be spent - that is, make "restricted donations," which will help avoid your funds being used for things like administrative costs. Organizations like Charity Navigator, Guidestar and Give.org, which is affiliated with the Better Business Bureau, can help. Look up the charity's IRS 990 Form and annual report.
An executor and trustee fulfill different duties. An executor is responsible for settling a will, while a trustee is charged with managing and distributing assets in a trust, according to Fidelity Investments. There are some qualifications that may seem obvious for both positions: trustworthiness, a willingness to fulfill their duties, and financial stability. If they can't manage their own finances, how will they be able to manage yours?
When choosing an executor, you will want to make sure that they are impartial, that they're young enough that they will likely survive you - and, in the event that they don't, that you have a Plan B in place. If you're not entrusting this role to a family member, it's best to hire a professional, because they will be held legally responsible should they mismanage the estate or otherwise fail in their duties. If they make serious mistakes in paying taxes, they could be held accountable in addition to the estate itself.
Fees will vary
My first question is, what constitutes a "large chunk" for your trustee? Trustees in New York, for instance, receive annual commissions based on the value of the size of the estate, with specific payout rates as follows: $10.50 per $1,000 of the first $400,000 of the principal; $4.50 per $1,000 of the next $600,000; and $3 per $1,000 for the remaining principal. Trustees also get 1% of payouts made. That's according to the law office of Jessica Wilson in Brooklyn, N.Y.
While the fees will vary depending on the complexity of your estate, knowing the market rate where you live will give you much-needed perspective. Your payable-on-death accounts should also help smooth the path ahead. "These rates are established by New York's Surrogate's Court Procedure Act," Wilson says. "The purpose is to ensure trustees are fairly compensated for their time and effort while ensuring that the trust's assets are well-managed and preserved."
"For real property held by a trust where a trustee is required to collect rents and manage the property, the commission is calculated based on the net amount of rents collected, not the gross amount," Wilson adds. "Additionally, trustees are entitled to an additional commission of 6% of the gross rents collected for their services related to managing real property, but only one additional commission is allowed, regardless of the number of trustees."
Your agreement should lay out both the fees and responsibilities in forensic detail so there's no confusion or subterfuge after you're gone. An executor must be over the age of 18 - or 21 in some states - and must not be a convicted felon. If you know the person, all the better. They should display an attention to detail and have experience with finances and the tax system. It's not a job for the faint of heart, which is why it's worth paying for the right individual.
Related: 'No one writes about "rich guy" early retirement': My wife and I earn $300,000 a year and have $3.75 million. We have 3 kids. When can I quit working?
You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.
The Moneyist regrets he cannot respond to letters individually.More columns from Quentin Fottrell:
'It's so unfair!' I'm miserable in my job. I'm 58 and have $1 million in a 401(k) and Roth IRA. Can I afford to quit?
My mother-in-law stole $25,000 from my husband's emergency fund. We donated to charity rather than give her a birthday gift - and she cried foul.
'She can't even buy groceries or put gas in her car': My friend's husband died, leaving her with three young children, no job and $15,000 in credit-card debt
Check out The Moneyist's private Facebook group, where members help answer life's thorniest money issues. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
-Quentin Fottrell
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.