Appendix 3 S.I. 2004/799: memorandum from
the Department for Constitutional Affairs
Public Trustee (Fees) (Amendment) Order 2004 (S.I. 2004/799)
1. The purpose of this Memorandum is to explain the
increases to the Public Trustee fees provided for in the 2004
Order and, in particular, the increase in the Public Trustee's
minimum fee for administering a trust, as requested by the Joint
Committee.
Background
2. The Public Trustee administers estates and trusts
when appointed in wills and settlements or by a court. For many
years after the office was established in 1906, he adopted an
"open" policy, being prepared to accept almost any case
in which a settlor or testator chose him to act. Increasingly,
and certainly since the Lord Chancellor issued 'Making Changes:
The Future of the Public Trust Office' in December 2000, he
has adopted a more restrictive policy of accepting cases only
on a "last resort" basis, where no suitable person or
institution in the private sector is willing or able to act. The
Public Trustee is subject to Treasury fees and charging principles,
which require him to recover the full costs of his office, subject
to a public subsidy for genuine last resort work.
3. The purpose of the 2004 Order is twofold. First,
it is intended to increase the charges for all trusts and estates
to ensure that the charges better reflect the cost of administering
the various trusts and estates, but to levy the larger increases
at the lower end of the scale as part of a process of reducing
the current cross subsidy between cases, which is inherent in
a scale fee system. The Public Trustee retains the ability to
remit fees, to ensure that vulnerable persons will be safeguarded
against these fee increases. Secondly, the 2004 Order introduces
substantial reductions to (and in some cases exemptions from)
the Public Trustee's withdrawal fee, which up to now has proved
to be a barrier to many non-last resort cases leaving the office,
as part of a process of encouraging non-last resort work to leave
the office.
The 2004 Order
4. The 2004 Order provides for increases in the rate
of the Public Trustee's annual administration fee, which accounts
for approximately 65 per cent of the total income from trust fees.
It also provides for increases in other miscellaneous fees. The
aim of these increases is to bring the total income received more
closely into line with the cost of doing the work, although even
with these fee increases the total income recovered will remain
substantially less than the cost of the services provided by the
Public Trustee.
5. Our analysis has shown that, on average, the current
cost of administering each trust is in the region of £2,000
per annum. Ministers have therefore decided to increase the minimum
fee to £300 per annum, which is a more realistic level. The
Order includes a proviso in paragraph 3 to provide that for trusts
with a capital value of less than £3,000, the minimum fee
will be capped at 10 per cent of the capital value. For example,
in the case of a trust with a capital value of £2,000, the
annual administration fee will be £200.
6. In addition, the 2004 Order provides a substantially
reduced rate for calculating the Public Trustee's withdrawal fee.
This is payable when a trust is distributed, either wholly or
partly, or when the Public Trustee retires. As part of the process
of encouraging non-last resort work to leave the office, no withdrawal
fee will be charged either on a retirement of the Public Trustee
or where he otherwise ceases to act as trustee (e.g. on a distribution
of the trust fund), where the particular trust has a capital value
of £30,000 or less on 31 March 2004. In other cases, the
withdrawal fee charged has been substantially reduced.
7. Accordingly, these fee increases will further
reduce the current shortfall between fee income received and the
cost of providing the Public Trustee services, whilst at the same
time making it financially more attractive for trusts, which could
be administered either by professional trustees in the private
sector (solicitors, accountants or trust corporations) or by family
members, to withdraw from the services of the Public Trustee.
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