Yes, trustees can get paid in California, but it depends on how the trust was set up. If the trust specifically states that a trustee is not to take any fees, then no, trustees are not allowed to be paid, but if the trust is silent, then trustees are entitled to receive only reasonable payment for their services. To decide what is reasonable, it is important to understand the size of the trust, the complexity of the terms, and the role and responsibilities of the trustee. While trustees may deserve payment for their services, many beneficiaries often worry trustees will cross the line from reasonable compensation to overcompensation, which may affect how much you inherit.
At Gokal Law Group, we have helped countless beneficiaries defend their inheritance rights and ensure trustees do not charge excessive fees. We understand that more than money is at stake; your family’s legacy is on the line. Our passion is helping you defend it. Here is everything you need to know about what trustees get paid and what constitutes reasonable compensation for trustee services.
Do Trustees Get Paid in California?
Yes, California Probate Code section 15681 states that trustees are entitled to “reasonable compensation under the circumstances” if the trust does not specifically bar trustee compensation. But why do trustees deserve compensation, and what constitutes “reasonable” trustee fees?
Answering these questions is key to determining if a trustee is overcharging your estate and if you need to consult a trust litigation lawyer.
Why Do Trustees Get Paid in California?
Serving as a trustee requires a range of tasks, such as preparing an accounting, communicating with beneficiaries, mediating disputes, managing property, or even managing a business, all while following trust terms, fulfilling their fiduciary duty, and abiding by California probate code.
Trustee compensation is payment for the work and time a trustee invests into managing the trust because these duties can be highly complex and time-consuming.
How Do Trustees Get Paid in California?
Trustee fees are paid from the trust’s assets, usually quarterly. However, trust terms could alter the pay periods and specify that the trust pays them annually or even twice a year. It’s also important to mention trustees receive cash in exchange for their services, not assets or property.
Related Article: How Are Annual California Trustee Fees Calculated?
How Much Do Trustees Get Paid in California?
There is no standard rate or fee for trustees because each trust situation is different. Sometimes, the trust instrument will specify how the trustee should be paid. This is ideal because the trust will indicate the trustee compensation hourly rate and/or percentage payment, which removes most ambiguity.
The trustee must adhere to how compensation is outlined in the trust document, though in certain circumstances, a judge may rule that the trustee deserves more because the trust creator underestimated how much work it would take to administer the trust.
If you believe a trustee is overcharging, it is crucial to consult with a lawyer to get help petitioning the court to determine whether their fees are reasonable and prepare for potential litigation. Several factors influence what “reasonable” trustee fees are in your situation:
- The size of the trust
- How many beneficiaries and personalities the trustee has to manage
- The trustee’s responsibilities
- The trustee’s degree of risk
- The value of the trust
- The performance of trust investments
- Any exceptional skills or experience the trustee has
Know also that if a trustee engages in trustee misconduct, you can work with a lawyer to dispute their fees and lower them. In severe cases, misconduct can result in trustees not receiving any compensation, which means those funds would remain in the trust.
On that note, a trustee charging excessive fees could be a breach of fiduciary duty in and of itself, or it could be the symptom of a larger trend of misconduct that could threaten to undermine the trust. Regardless, legal representation is crucial to holding them accountable.
Related Article: How Do You Prove a Breach of Fiduciary Duty?
What is Reasonable Compensation for Trustee Services in California?
Determining “reasonable compensation” is crucial for those wondering, Do trustees get paid in California? Of the factors that determine reasonable compensation for trustee services listed above, the most important is whether the trustee is professional or non-professional.
Professional trustees are also called private professional fiduciaries. They usually charge standard hourly rates, which typically fall between $100 and $175 an hour. Sometimes, they charge a fee of 1% to 1.5% of the value of trust assets annually. Still, they may charge more if they handle extraordinary tasks, such as helping with a business the trust holds, investing, or managing real estate.
Non-professionals often have to enlist the help of third-party professionals, such as CPAs, lawyers, real estate agents, or even an investment firm, to uphold their responsibilities.
Non-professional trustees are usually family or friends of the person who created the trust. Their fees typically range between 0.5% to 1% of the value of trust assets every year or $30 to $75 per hour. Some non-professional trustees may even choose not to take any compensation at all.
Another category is corporate trustees. Corporate trustees are banks or investment firms hired to help administer a trust. Corporate trustees typically receive a 1% to 2% of trust assets yearly.
Related Article: California Fiduciary Fee Schedule: How Much Will You Pay?
Do Trustees Get Reimbursed for Trust-Related Expenses?
One final consideration is reimbursement if you are asking, Do trustees get paid in California? This is a component of trustee fees that is often overlooked but crucial to understand.
On top of compensation, trustees could also be entitled to reimbursement for trust-related expenses they pay out of pocket, such as travel, lodging, storage, insurance, or taxes. For example, if they have to travel to administer the trust, they can reimburse themselves for this expense.
If a trustee seeks reimbursement, they should have accurate and comprehensive records of these expenses. In situations where a trustee is reimbursing themselves for expenses without accurate or organized records, this is a sign that they may be overcharging.
As soon as you have reason to believe a trustee is overcharging, it is imperative to contact a trust litigation lawyer. Your attorney can help you stop trustees from overcharging, remove and replace them, compel the court to order them to repay the trust, and even to pay damages.
“Trustees have a right to receive payment for their work because being a trustee is very demanding and time consuming. But this does not mean they can treat the trust like their personal piggy bank. Excessive trustee fees can harm the trust and the beneficiaries, as these fees eat into your inheritance. As soon as you feel like a trustee is overcharging, that is when to contact an attorney to make sure your rights are protected.”
–Harry Wallace, Senior Trial Attorney, Gokal Law Group
Related Article: Can a Trustee Withdraw Money from a Trust Account for Personal Use?
Is a Trustee Overcharging for Their Services? Contact Us Today.
So, do trustees get paid in California? Yes, most trusts allow trustees to receive fair and reasonable compensation, but that does not mean they can charge whatever they want. A trustee who is overcharging for their services is violating their fiduciary duty, jeopardizing your financial future, and tarnishing your family’s legacy. Working with an attorney is crucial to holding them accountable, protecting your rightful inheritance, and preserving the integrity of the trust.
Visit our Contact Page to schedule a consultation to combat excessive trustee fees. We will review the specific circumstances of your case to determine how reasonable the compensation is and guide you through the best course of action in your situation.
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