Trust LitigationHow to Determine a Trustee Fee in California, and Can it be Disputed?

January 16, 2020by kwsm0
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Trustees are responsible for assets left behind and what happens to them. Trustees put time and consideration into the handling of the trust and should be compensated fairly. It can be, however, a pain point for the beneficiaries who do not understand the need for such a role and do not understand all that it entails. How do you, as the beneficiary of a trust, know that the trustee’s fee is both earned and fair for the trustee?

 

Understanding the Role of the Trustee

 

It is first important that both sides understand the role the trustee plays and the responsibilities that are afforded with that role. Simply put, the trustee is the person or persons selected to manage the assets in a trust. It is this person’s duty to set aside their personal feelings and must act in the best interest of the grantor and their wishes. The trustee will represent the trust estate, manage the expenses, attend to taxes, and distribute the assets of the estate.

 

Determining the Trustee Fee

 

In some cases, the terms of the trust dictates the trustee fee. If the trustee believes the fee stated in the trust is too low or unfair in anyway, the trustee will have to get the agreement of all the beneficiaries and/or seek approval of the court. Most often however, trusts terms are often simply state that a trustee is entitled to “reasonable compensation,” as stated by California Probate Code section 15681. When determining the trustee fee, Rule 7.776 of the California Rules of Court specify eight factors to be taken into consideration:

 

(1)  The gross income of the trust estate;

 

(2)  The success or failure of the trustee’s administration;

 

(3)  Any unusual skill, expertise, or experience brought to the trustee’s work;

 

(4)  The fidelity or disloyalty shown by the trustee;

 

(5)  The amount of risk and responsibility assumed by the trustee;

 

(6)  The time spent in the performance of the trustee’s duties;

 

(7)  The custom in the community where the court is located regarding compensation authorized by settlors, compensation allowed by the court, or charges of corporate trustees for trusts of similar size and complexity; and

 

(8)  Whether the work performed was routine, or required more than ordinary skill or judgment.

 

Every trust is different, and because of that, every trustee will be compensated differently. It is the trustee’s responsibility to be honest in the assessment of their fee, and it is the beneficiaries’ responsibility to uphold and ensure this honesty and fairness.

 

Professional trust companies often charge an annual rate based on a fixed percentage of the value of the trust estate. Other professional trustees will charge a reasonable hourly rate and keep specific time records.

 

Disputing a Trustee Fee

 

It is within the beneficiaries’ rights to request information about what fees have been paid and the timekeeping used to support those fees. Trustees are also required to provide accounting annually, and at the point that the trust is terminated. In the case that there is a question of the accuracy of the accounting, the beneficiary may choose to settle the accounting in court and come forward with their objection. California Probate Code section 16061 requires the accounting include any and all trustee compensation.  

 

Dishonest trustees will try to charge the trust tens of thousands, often hundreds of thousands of dollars more than they are entitled to. Accurate and appropriate accounting is a right afforded to all trust beneficiaries, including all information on the trustee’s fees. If you feel as though your right to this information may have been obstructed, we can help. Contact us or give us a call at 949-753-9100 to discuss your case with our team. 

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Trustees are responsible for assets left behind and what happens to them. Trustees put time and consideration into the handling of the trust and should be compensated fairly. It can be, however, a pain point for the beneficiaries who do not understand the need for such a role and do not understand all that it entails. How do you, as the beneficiary of a trust, know that the trustee’s fee is both earned and fair for the trustee?

 

Understanding the Role of the Trustee

 

It is first important that both sides understand the role the trustee plays and the responsibilities that are afforded with that role. Simply put, the trustee is the person or persons selected to manage the assets in a trust. It is this person’s duty to set aside their personal feelings and must act in the best interest of the grantor and their wishes. The trustee will represent the trust estate, manage the expenses, attend to taxes, and distribute the assets of the estate.

 

Determining the Trustee Fee

 

In some cases, the terms of the trust dictates the trustee fee. If the trustee believes the fee stated in the trust is too low or unfair in anyway, the trustee will have to get the agreement of all the beneficiaries and/or seek approval of the court. Most often however, trusts terms are often simply state that a trustee is entitled to “reasonable compensation,” as stated by California Probate Code section 15681. When determining the trustee fee, Rule 7.776 of the California Rules of Court specify eight factors to be taken into consideration:

 

(1)  The gross income of the trust estate;

 

(2)  The success or failure of the trustee’s administration;

 

(3)  Any unusual skill, expertise, or experience brought to the trustee’s work;

 

(4)  The fidelity or disloyalty shown by the trustee;

 

(5)  The amount of risk and responsibility assumed by the trustee;

 

(6)  The time spent in the performance of the trustee’s duties;

 

(7)  The custom in the community where the court is located regarding compensation authorized by settlors, compensation allowed by the court, or charges of corporate trustees for trusts of similar size and complexity; and

 

(8)  Whether the work performed was routine, or required more than ordinary skill or judgment.

 

Every trust is different, and because of that, every trustee will be compensated differently. It is the trustee’s responsibility to be honest in the assessment of their fee, and it is the beneficiaries’ responsibility to uphold and ensure this honesty and fairness.

 

Professional trust companies often charge an annual rate based on a fixed percentage of the value of the trust estate. Other professional trustees will charge a reasonable hourly rate and keep specific time records.

 

Disputing a Trustee Fee

 

It is within the beneficiaries’ rights to request information about what fees have been paid and the timekeeping used to support those fees. Trustees are also required to provide accounting annually, and at the point that the trust is terminated. In the case that there is a question of the accuracy of the accounting, the beneficiary may choose to settle the accounting in court and come forward with their objection. California Probate Code section 16061 requires the accounting include any and all trustee compensation.  

 

Dishonest trustees will try to charge the trust tens of thousands, often hundreds of thousands of dollars more than they are entitled to. Accurate and appropriate accounting is a right afforded to all trust beneficiaries, including all information on the trustee’s fees. If you feel as though your right to this information may have been obstructed, we can help. Contact us or give us a call at 949-753-9100 to discuss your case with our team.