Hess-Verdon & Associates PLC
Can a Trustee also be a Beneficiary?
Yes. Many trustees are also beneficiaries of their trust. For instance, in family trusts, the surviving spouse will often be the Trustee and the Trustee’s beneficiary. However, if the sole Trustee is also the Trustee’s sole beneficiary, this arrangement invalidates the trust. One way to prevent this problem is to designate a successor trustee or successor beneficiary when setting up the trust.
Can a Beneficiary be a trustee
The simple answer is yes, a Trustee can also be a Trust beneficiary. In fact, a majority of Trusts have a Trustee who is also a Trust beneficiary. Being a Trustee and beneficiary can be problematic, however, because the Trustee should still comply with the duties and responsibilities of a Trustee.
Can a Trustee Be a Beneficiary of a Trust
HESS-VERDON – #1 SOUTHERN CALIFORNIA TRUST & ESTATE LAW FIRM
(DEEP BENCH COURT TIME)
Now, let’s go over a few roles in the trust administration process so the distribution of estate trust assets is timely to the beneficiaries.
First, the roles in the trust administration process are the following:
- Trustee: Or can be called “successor trustee.” There is always a Trustee and typically will be the settlor in the initial phases. Once the settlor/trustor dies, all trusts become irrevocable. The new successor trustee enters in to administrate the estate.
- Settlor/Grantor: The Settlor/Grantor is the person with the estate that wishes to protect assets via a legal instrument, i.e., a trust (see revocable and irrevocable trusts)
- Beneficiary: The beneficiary is the person who will derive the advantage from a trust, will, or insurance policy. In the insurance policy, you should have both “primary” and “contingent” beneficiaries.
- Heir: An “heir” is a person, which includes a surviving spouse, who is entitled to receive the estate via “intestate succession”. A beneficiary receives the death benefit but not through intestate succession.
With that said, at the passing of the settlor/grantor, all trusts straightaway convert to an irrevocable status. So, a Trustee can be the beneficiary and an heir of the estate.
Becoming a Trustee, however, has its advantages and disadvantages. The disadvantage could be the remaining beneficiaries can consider a potential “conflict of interest.” The advantage is more control of the estate while living up to the fiduciary responsibilities of a trustee. Therefore, if you are considering a trustee role, learn about the following:
Your main objective is to eliminate the possibility of being sued because the beneficiaries see you unfit or that you have violated your legal responsibility. In this case, they could petition the probate court for the removal of a trustee. Are you a beneficiary? Learn more about contesting a trust.
If I’m a Trustee, do I get paid? (trustee fee)
Trustee compensation is possible, yet ambiguities lie within the courts. If you look at the probate code. It states that a trustee is entitled “reasonable compensation.” Now, if you have breached any fiduciary duty, based on probate code. You could pay back any trustee compensation because of a breach of trust.
Now, what is reasonable compensation? (Here are some examples)
- Private Trustees: Typically paid an hourly rate ($20.00 to $45.00 per hour)
- Corporate Trustees: Typically paid 1% to 2% of the Trust Assets.
- Professional Trustees: Due to their experience up above a private trustee, a professional trustee compensation is an hourly fee of over $110.00+ per hour for their work.
What is “ordinary compensation” vs. “extraordinary compensation”?
The courts will typically distinguish between ordinary and extraordinary compensation. Here is a partial breakdown of the differences:
- Ordinary compensation: Expected duties to be performed by a Trustee.
- Extraordinary compensation:
- Handling litigation
- Running a business
- Managing commercial property
Within the two types of compensation, California law provides guidelines. They are the following:
- What is the value of the Trust assets
- Success in administering the trust
- Faithfulness in following the settlor/grantor wishes
- Were there any risks and responsibilities up to and above ordinary compensation
- Total time spend administering the trust.
- Local and state court rules regarding trustee administration.
Lastly, take into consideration this fact. If you are a trustee and you delegate your work to a real estate attorney, for example, your trustee fees may be reduced by the courts.
Trust and Estate Planning
Our managing partners have practiced law for over 30+ years. We have deep court experience, and after 3000+ clients throughout our tenure, you will receive in-depth knowledge in trust & estates, business, and real estate matters.
Request a no-obligation case review today. Feel free to call, and our helpful staff will set you up with one of our specialized attorneys.
- Charitable Remainder Trust (CRT)
- Grantor Retained Annuity Trust (GRAT)
- Qualified Personal Residence Trust (QTIP)
- Legacy Trusts
- Learn more on estate planning.
With over 30+ years of law, 3000+ clients throughout our tenure,
you can receive in-depth legal counsel today.
Request a Case Review Today Call us at 949-706-7300Step-up Basis at Death for Revocable and Irrevocable Trusts A step-up in basis refers to the appraisal of appreciated assets' value in a trust to inform taxation upon inheritance. Usually, what is considered...
Contesting a Trust in California