In California, successor trustees are generally entitled to compensation, but how that compensation is determined can vary — primarily depending on whether the trust document includes instructions for trustee pay.
Under California Probate Code section 15680, if the trust provides for compensation, the trustee is entitled to be paid according to those terms. However, the court has discretion to adjust trustee fees as it sees fit.
For example, if a trustee’s responsibilities end up being significantly different from those anticipated when the trust was created — or if the fees are deemed inequitable, unreasonably high or low, or are impacted by extraordinary circumstances — the court may order lesser or greater trustee compensation.
If the trust instrument doesn’t mention trustee pay, Probate Code section 15681 allows the trustee to receive “reasonable compensation under the circumstances.” Of course, what’s “reasonable” can be subjective and may trigger disputes — especially if trust beneficiaries believe the trustee is being overpaid.
For instance, a trustee managing a simple trust with mostly cash assets and a single round of distributions would likely receive lower compensation than a trustee managing complex investments and real properties or administering a long-term trust.
Likewise, non-professional trustees — such as family members — generally take lower trustee fees than professional trustees, who may justify higher fees due to their expertise and efficiency.
In short, while trustees are usually entitled to compensation, the appropriate amount depends on the trust’s terms, the complexity of the trust administration and the trustee’s qualifications.
To better understand how trustee fees may apply in your case — or to challenge unreasonable trustee compensation — consulting a probate attorney is recommended.
What Are Trustee Fees?
Trustee fees refer to the compensation a trustee takes for the time and effort they dedicate to managing a trust.
Trustees are typically paid from the trust itself, not from the personal pockets of the trust beneficiaries or trust creator (called the settlor, grantor or trustor). Trustee fees usually are treated as administrative expenses.
The timing of trustee fees — which may be quarterly, biannually or annually — can vary based on the trust instrument’s instructions. However, if instructions are absent, the trustee can request reasonable compensation in intervals, which typically align with the duties they’re performing.
It’s worth noting that, in addition to their usual trustee compensation, trustees are generally entitled to reimbursement for reasonable expenses they incur while administering the trust. These might include travel expenses, office supply costs, postage and insurance premiums related to trust management.
Transparency and thorough documentation are critical — both to protect the trustee from personal liability and to enable beneficiaries to assess whether a trustee’s fees are reasonable.
Why Do Trustees Get Paid?
Trustees are entitled to compensation because their role carries significant responsibilities — often comparable to a full-time job.
Their duties can include gathering and valuing trust assets, preparing trust accountings, paying taxes and debts, making investment decisions and distributing trust assets to beneficiaries in accordance with the trust’s terms. These duties demand careful judgment, consistent effort and time.
Serving as trustee also carries risk. If, for instance, a trustee mismanages trust assets — even unintentionally — they could be held personally liable for financial harm to the trust.
Compensating trustees not only helps ensure the trust is administered properly but also encourages capable individuals to take on the role. While some trustees may serve out of goodwill, such as family members or close acquaintances, the law still entitles them to reasonable pay for the time and effort they dedicate to the role — though keep in mind non-professional trustees may be paid less than professionals.
Are Trustee Fees Guaranteed?
While trustees are legally entitled to take reasonable fees, beneficiaries can just as well object to a trustee’s fees if there is good reason for doing so — such as proof the trustee misused or misappropriated trust funds or breached their fiduciary duties.
If a beneficiary wishes to challenge trustee fees, they can file a petition with the court to determine their reasonableness or object to a petition filed by the trustee seeking trustee fees. In making its decision, the court will consider a number of factors, which we go over below.
What Is Reasonable Compensation for a Trustee?
There is no fixed statutory rate for trustee fees like there is for executor fees. Rather, a trustee’s compensation is determined either by the terms of the trust or, if the trust is silent on the matter, by the trustee determining what’s “reasonable” based on their duties, experience and other important factors.
“Reasonable” trustee fees are sometimes calculated as a percentage of the trust’s assets on hand (e.g., 1% of the total assets on hand) or as an hourly rate depending upon the nature of the services provided.
Professional vs. Non-Professional Trustee Fees
Successor trustee fees in California often depend on whether the trustee is a professional or a non-professional. Professional trustees typically take higher fees due to their expertise, efficiency and familiarity with trust administration, which can help ensure a smoother and more compliant process.
With that being said, sometimes “non-professional” trustees can justify higher compensation if they have specialized skills that have assisted with administration. For example, if a trustee, while not a licensed fiduciary, possesses tax or business expertise that was utilized in the administration process, they may be able to justify a higher rate for their services.
Other Factors That Could Influence Trustee Fees
In deciding whether a trustee’s fees are warranted and reasonable, the court will consider the factors discussed below.
How Complex Were the Trustee’s Responsibilities?
If a trustee has to go above and beyond the standard duties of a trustee when administering a trust, this could entitle them to greater compensation.
For example, did a trustee need to arrange sales of real properties?
Did they need to preside over the dissolutions of multiple businesses?
Did they need to litigate on the trust’s behalf or defend the trust in a dispute?
If a trustee’s duties are unusually complex or demanding, they may justify higher compensation and influence what is considered “reasonable” under the circumstances.
What Is the Trustee’s Degree of Risk?
Make no mistake: Serving as a trustee comes with serious responsibilities — and potential legal consequences if those duties are mishandled. Taking on this role means accepting a degree of personal liability, which should be factored into the trustee’s compensation.
From managing sensitive family dynamics to navigating complex legal and financial tasks, a trustee’s life can be significantly impacted by their role. The court takes these risks into account when assessing whether the trustee’s compensation is reasonable.
In general, the greater the liabilities and responsibilities involved, the higher the justified pay.
What Is the Value of the Trust?
Another important factor in deciding a trustee’s compensation is whether the cumulative value of a trust is sufficient in supporting the fee requested by the trustee.
Since trustee fees are taken out of the trust — and could directly impact beneficiaries’ inheritances — the court usually won’t allow the trustee to collect steep trustee fees if the total value of the trust isn’t very high.
How Are Trust Investments Performing?
Most trusts require trustees to prudently invest trust assets so income can be generated for the trust. In determining whether trustee fees are reasonable, the court generally will take the success or failure of a trustee’s investments into account.
The unpredictable nature of investments means that returns can never be assured. However, so long as a trustee avoids placing trust assets in highly speculative or risky investments, they generally won’t be held liable for any resulting losses.
The same doesn’t hold true if they pursue risky or speculative strategies. In such cases, the trustee could be accused of fiduciary misconduct — and may even forfeit their right to trustee compensation if the trust suffers financial harm as a result.
Does the Trustee Have Specialized Expertise?
The trustee’s experience and relevant skills play a key role in determining reasonable trustee fees.
For example, does the trustee have a background in accounting, finance or law? If so, they may be justified in charging higher fees due to their ability to handle complex trust matters directly without soliciting third-party help.
Non-professional trustees, who may lack such expertise, often need to outsource tasks, making lower compensation more appropriate.
Important Tips for Taking Trustee Fees
To help trustees avoid conflicts with beneficiaries, Keystone offers practical guidance on how to take trustee fees properly and ensure those fees are reasonable.
Trustees must closely follow the terms outlined in the trust instrument — including any provisions related to trustee compensation. If the trust sets a specific payment structure, the trustee is legally obligated to adhere to it. However, if trustee compensation seems unfair or doesn’t reflect the scope of their duties, the trustee may petition the court for an adjustment.
When a trust is silent on trustee fees, the trustee is permitted to take an amount they believe is reasonable based on the complexity of the administration and the time and effort involved. Still, exercising discretion is critical, as beneficiaries of the trust retain the ability to object to trustee fees after payment is made.
Maintain a Work Log
In the event a trustee is ever asked to justify their fees, it’s crucial they maintain a detailed work log. This log should include the date of each task, a description of the work performed and the time spent completing it.
Keeping clear records not only demonstrates transparency but provides concrete evidence of the trustee’s efforts if questions arise from beneficiaries or the court. Without this documentation, it may be significantly harder for a trustee to defend the reasonableness of their compensation.
Take Trustee Fees at Regular Intervals
There is no requirement for trustees to wait until administration is complete to collect compensation, nor must their fees be pre-approved by the court.
In fact, receiving trustee fees at regular intervals is often preferable. It can help minimize the trust’s taxable income, reduce the trustee’s overall tax burden, encourage consistent record-keeping and make compensation less likely to be challenged by beneficiaries — since smaller, periodic payments tend to raise fewer concerns than a large lump-sum payment.
Discuss Trustee Fees With Beneficiaries
Unless the trust specifically requires it, trustees aren’t usually required to seek beneficiary approval before taking trustee fees. Nevertheless, open communication with beneficiaries about trustee fees is often a smart move.
Proactively discussing compensation can help prevent misunderstandings and reduce the risk of disputes. When engaging in these conversations, trustees should be prepared to present detailed work logs and evidence of the value of their efforts.
If a consensus can’t be reached between the trustee and beneficiaries, court intervention may become necessary to resolve the disagreement.
Consult a Probate Attorney About Trustee Fees
Given the complexities involved in calculating and justifying trustee fees, it’s wise to work with a probate attorney. They can help interpret the trust document, guide you through your duties, and assess what constitutes reasonable compensation based on the trust terms or your work and responsibilities.
Still have questions about trustee fees in California?
Whether you’re a trustee seeking guidance on what fees are reasonable, or a beneficiary concerned about overpayment, our skilled probate attorneys can help.
Contact Keystone Law Group today to get the advice you need to navigate your legal matter properly and effectively. We are standing by to assist.
