Annual Trustee Fees in California
California trustee fee compensation
The California Probate Code controls the question of the amount of annual trustee fees in the state. The Code is not specific as to the amount and requires that trustee fees must be reasonable. The language sets the preference for fees charged by the Grantor of the trust in the trust document.
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Annual California trustee Fees
The California Probate Code controls the question of the amount of annual trustee fees in the state. The Code is not specific as to the amount and requires that trustee fees must be reasonable. The language sets the preference for fees charged by the Grantor of the trust in the trust document. The trustee is entitled to the compensation specified in the trust instrument. If the trust document does not set the compensation, then the trustee is entitled to reasonable compensation under the circumstances.
What is reasonable under the circumstances?
The court cases in California have interpreted the reasonable fees question. The factors that have emerged include:
• The skill and time required for trust administration
• The resources provided by the trustee
• The severity of required risk and extent of the trustee’s responsibility
• The trustee’s level of skill, knowledge, and expertise
• The amount or value of assets in the trust
• Local court rulings on trustee compensation
The local custom for fees is an important consideration. A large metropolitan area like San Francisco or Los Angeles might produce higher awards than a more remote area like Solano County.
The question arose in many complex cases of extraordinary effort. Some trusts have required extensive litigation, expertise in managing a business or commercial concern. The courts have developed a method for assessing the annual trustee fee based on merit and the work required to settle the trust.
What Is a Trustee Fee Schedule?
Corporate trustees and government entities have a special place in the law. They can develop and publish fee schedules that determine their compensation. One can classify Corporate and government trustees as institutional trustees. Professional trustees are private and licensed individuals or small firms. Family member trustees are persons close to the Grantor of the trust.
• Family member trustees usually get the lowest range of fees. They often do not bring experience or expertise, and they may delegate a significant amount of the work.
• Professional trustees usually bring expertise and knowledge to the Grantor’sGrantor’s mission. These licensed individuals or firms charge a percentage of the trust value or an hourly fee. A typical fee arrangement might be comparable to an attorney or accountant.
• Institutional trustees publish a fee schedule, and courts have generally accepted their claims. Institutional trustees provide in-depth capacities, internal and external networks of experts, and manage complex situations.
• Court supervised trusts require court approval of trustee fees. Whether by schedule, percentage, or other election, the court will consider and approve any final payment.
Using a Trustee Fee Calculator
Sections 10810-10814 of the California Probate Code sets out the statutory trustee fee schedule for estates. The section on fees sets the minimum and maximum based on the size of the estate. A trustee fee calculator uses the California Code standards and applies it to an estate’s specific terms.
The result can yield an estimate of the reasonable trustee fees.
Part (a) of Section 10810 describes the fees for ordinary and usual services as follows:
• The first one hundred thousand dollars the fee is four percent ( 4 percent of $100,000)
• On the next one hundred thousand dollars, the fee is three percent ( 3 percent of $100,000)
• On the next eight hundred thousand dollars, the fee is two percent ( 2 percent of $800,000)
• On the next nine million dollars, the fee is one percent (1 percent of $9,000,000)
• On the next fifteen million dollars, the fee is one-half percent ( .05 percent of $15,000,000)
• The court determines a reasonable fee for amounts above twenty-five million USD.
When computing the value, the calculator uses the amount accounted for by the trustee. This is the total appraisal of property and inventory, plus gains and receipts. The formula subtracts losses from sales and does not include the value of encumbrances or obligations.
Fee Schedules Versus Trustee Compensation Hourly Rate
The terms in the trust document control the matter of fees and compensation. The first reference is to the terms set by the Grantor. Trustees will have to demonstrate substantial factors to enhance rewards beyond the levels set in the trust document.
– Reductions, Penalties, and Fees
When a trustee breaches its duties, it may be liable to the beneficiaries. Fee reductions or offsets are a powerful tool for enforcement against a breach of duty.
– Delegation of Duties
When a trustee delegates part of his or her work, the beneficiaries can move to reduce fees. The law recognizes the basic principle of reasonable compensation for the work performed by the trustee. When the trustee delegates work to an expert or other consultant, there is an argument for reducing compensation.
Quality Equals Higher Pay
The factors that affect trustee compensation rely upon qualitative factors as well as the size of the estate. Whether by percentage fees or a trustee compensation hourly rate, quality is a vital concern. The policies toward higher compensation favor a trustee that does exceptional work and faces challenging circumstances.
Faithfulness and loyalty also rate notice and reward. The policies award exceptional skill in settling an estate with high fees. Trustees that spend large amounts of productive time can ask for fee rates that cover their extra efforts. Handling a large and complex estate also justifies a high fee request.
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