Trustees are entitled to compensation from the trust for their trust administration related services. The amount received must be reasonable for the services provided. So what is reasonable? That’s the $20,000 question, and one that has sparked a lot of debate, confusion and litigation by trust attorneys throughout California.Some trusts specify the amount of trustee fees, but most do not. This doesn’t change the fact that trustees are only entitled to reasonable compensation in relation to the work they perform. If a trust provides for unreasonably high or low fees, the probate court may make an order for reasonable trustee fees. It is worth noting that anyone seeking a fee order should do so immediately because the amount ordered may only take effect after the order is made. As such, any fees taken pursuant to trust terms before an order is entered will likely remain with the trustee, unless of course they are grossly unreasonable. Trustees do not need court approval to take fees. Seeking an order is a good idea, however, if fees are not specified in the trust and if the trustee is concerned that a beneficiary may be upset with how much they plan to take.
The following two sections of California Probate Code are the primary authority on trustee fees:
(a) Subject to subdivision (b), if the trust instrument provides for the trustee’s compensation, the trustee is entitled to be compensated in accordance with the trust instrument.
(b) Upon proper showing, the court may fix or allow greater or lesser compensation than could be allowed under the terms of the trust in any of the following circumstances:
(1) Where the duties of the trustee are substantially different from those contemplated when the trust was created;
(2) Where the compensation in accordance with the terms of the trust would be inequitable or unreasonably low or high; and
(3) In extraordinary circumstances calling for equitable relief.
(c) An order fixing or allowing greater or lesser compensation under subdivision (b) applies only prospectively to actions taken in administration of the trust after the order is made.
15681. If the trust instrument does not specify the trustee’s compensation, the trustee is entitled to reasonable compensation under the circumstances.
The amount of a trustee’s fee depends on many factors. How much work was done; how much skill, knowledge and ability it took; how much time was spent; their level of efficiency; how much they saved or cost the trust; did they also manage real property, a business, or stocks; did they have problems communicating with beneficiaries; did they take extraordinary action to increase the trust’s value; the list can go on and on. What I am trying to say is that reasonable fees are based on the facts and circumstances of each case. Since that’s not a very satisfying answer, I’ll go out on a limb and suggest that some laymen trustees earn from $20 to $35 an hour, and some professional trustees earn as much as $250 an hour or 2% to 5% of the trust’s value every year. If you have any questions or would like to retain us to assist with a trustee fee dispute call now. (714) 963-7543.