Should You Expect Compensation as a Trustee?

Trustees are generally entitled to be compensated for the work they do in administering a Trust. Compensation is either the amount set forth in the Trust agreement, or it provides the Trustee with “reasonable compensation” if the Trust is silent on the issue.  A new case decided by the Court of Appeals in 2012 establishes that the Probate Court cannot award compensation to a Trustee in an amount greater than established in the Trust agreement.  See Thorpe v. Reed (2012) 211 Cal. App. 4th 1381.

This issue is important to understand.  For estate planning clients, consider whether you want to limit or prohibit the payment of compensation to Trustees and how your decisions will impact the people are appointed to administer the Trust after your death.  Clients who are asked to act as a Trustee should review the terms of the trust and determine what their compensation might be before accepting the position.  A trustee can always waive compensation if the job is easier than expected, but sometimes even the most generous person should be compensated for doing a job that requires a substantial number of hours of work.  Finally, ask your attorney how “reasonable compensation” is calculated in your particular county.  Certain courts routinely deny fees that a Trustee would consider reasonable – particularly if detailed time and expense records are not kept.  Generally, a Trustee will receive a fee of 1% of the value of the Trust, but this may not even begin to compensate the Trustee for the actual time spent on the job.