Additional Information to Know / Questions to Ask

What are Assets Under Management (AUM) Fees?

Assets Under-Management, or AUM, is a fee charged by a custody agent (i.e. a bank) or Trustee based on a percent of the trust corpus (i.e. how much money is in the trust account). Most programs charge this annually on the anniversary date of funding. This is designed to benefit the Trustee or custody agent, not the client. In other words, most programs charge the fee upfront when there is the most money in account instead of periodically through the year as funds are spent. Depending on the client’s rate of the spending, this can result in significantly higher fees overtime for the client. At CPT Institute, we do not feel that is equitable to our clients. We’ve agreed with our custody agent, True Link Financial, to calculate AUM based on an average daily balance and withdraw the fee quarterly. In other words, our clients pay the AUM as-they-go based on the assets they have instead of being billed when they have the most money in their account.

Conflicts of Interest

If a Trustee charges based on a percentage of the Assets Under-Management (AUM), they have a financial incentive to not allow you to spend money from your trust account. Especially for big purchases. That’s why at CPT Institute we choose to charge a flat rate fee instead of an increased percentage of AUM.

Many Trustees hide behind “Principal Reduction Rules” which limits spending more than a given amount or percentage from the Trust. CPT Institute does not abide by this practice.

Common Undisclosed Fees

Generally, trusts require language to modify fees based on the client’s situation. Many providers use this as a justification to not disclose all the fees coming from the Trustee and their Custody Agent (i.e. bank). At CPT Institute, fees are 100% transparent and only exclude 3rd-party fees.

Here are some common hidden fees to watch out for:

  • Case management/consultation fees billed hourly, or by the individual call, from the client.
  • Varying tax preparation fees year-to-year
  • Retention at time of death, many local programs still retain 100% of funds at time of death or charge a “Termination fee” to close the account.
  • Additional fees on structured settlements or annuities assigned to the trust. This is common for Trustees who only charge a percentage of Assets Under Management.
  • Minimum thresholds: once the trustee has allowed the client to spend down a significant amount of the trust corpus, the Trustee may try to transfer you to another program because they can no longer make enough profit on a percentage alone.

Other Questions to Ask a Trustee

  1. Does the Trustee have a transparent fee schedule absent of hidden fees when questioned?
  2. Do they reject the practice of limiting spending a certain amount or percentage of the trust corpus a client can spend at once based on his/her needs? (See Conflicts of Interest for more information.)
  3. Do they maintain a call center where a client can get questions answered at no additional charge?
  4. Do they have online portals or mobile applications to make it easier to access your account?
  5. Do they have an automated notification system (i.e. email, call or text) to keep clients informed of disbursements?
  6. Do they use Secured VISA Cards that are used like a credit card to increase access to the account?
  7. Do they regularly participate in an independent third-party audit of their financials?
  8. Do they log calls and communication to more thoroughly investigate and resolve client disputes?
  9. Do they waive administration fees on Medicare Set-Aside (MSA) funds?