Back to the Learning Center

By: Scott Grossman on October 18th, 2016

Is the California Trustee’s Work Adequately Compensated?

Trustee’s Work Adequately Compensated?

The California probate law does not answer the question. The law states that if compensation isn’t determined in the trust, the trustee should receive “reasonable” compensation. The next question is obviously, “What does reasonable mean?”
Some trusts are large and complex. Other trusts include a few assets that can be disposed of in a short time. Moreover, the amount of energy, time, and skill  the trustee needs to dedicate to the task is different in both cases. Consequently, compensation is made accordingly.

Two ways to establish the trustee’s fees:

  1. As a percentage of the value of the total assets on the date of the settlor’s death
  2. An hourly rate.  This is set according to the skill level of the work

The trustee may want to take an hourly rate of $100 for financial work and settle for $30 per hour for tasks like sorting, cleaning, filing, etc. Consequently, this, in turn, may invite contests and discussions. The trustee’s decision on the system of compensation, if not provided for in the trust instrument, needs to take into account the amount of work, the required skills, and the prevailing atmosphere among the beneficiaries.

Furthermore, a compensation based on a percentage of the assets is simpler if the percentage is set at the right level.

Even though inheritance is not taxed, any fees collected by trustees are considered taxable income. If the trustee is also a beneficiary, he or she may reach an agreement with the other beneficiaries to collect compensation for administering the trust through a share of the distributed assets.

In most cases, it is useful for the trustee not to settle the question of compensation until the trustee has had a good feel of the difficulties and amount of work involved. In all cases, the trustee will have to keep a detailed calendar and time log of all the tasks performed. This is a precaution to any questions that could come up about the services.

Talk to San Diego estate planning and probate attorney Scott Grossman about your situation and the questions you have. Call our lawyers at (888) 443-6590 or (888) 443-6590 for your FREE 30-minute telephone consultation.  Order our FREE book The Insider’s Guide to California Probate and Trust Administration.