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Q: Compensation for Trustee of Living Trust in California ( Answered 5 out of 5 stars,   1 Comment )
Question  
Subject: Compensation for Trustee of Living Trust in California
Category: Business and Money > Accounting
Asked by: anon8-ga
List Price: $50.00
Posted: 14 Jun 2005 08:13 PDT
Expires: 14 Jul 2005 08:13 PDT
Question ID: 533188
What is "reasonable compensation" for a trustee for a family trust?  I
am trustee for my mother, who has Alzheimer's.  Instructions in the
trust explicitly state all funds are for her benefit, etc.  I am also
a beneficiary; the other beneficiary is agitating for "advances on her
inheritance" through her attorney, all of which I have refused.  I
have also been reluctant to accept any compensation because of this
hostility and what I see as inevitable court battle when my mom passes
away.  I am told this is too generous, but no one has advised a figure
or hourly wage.  Institutions charge various rates to act as trustee,
higher for personal maintenance of course (as is the case with someone
with Alzheimer's), but I am reluctant to do that since this is my
mother afterall.  Bottom line:  Is there a popularly recognized
standard for trustee compensation against which I can judge my work,
and from which I can determine a defensible salary?
Answer  
Subject: Re: Compensation for Trustee of Living Trust in California
Answered By: journalist-ga on 14 Jun 2005 09:16 PDT
Rated:5 out of 5 stars
 
Greetings Anon8,

One percent (1%) of the fair market value of assets per annum is what
I have discovered as reasonable compensation for a trustee fee in
California.  Please read on.

First, basic info on trustee compensation in California:

"TRUSTEE COMPENSATION
"If the trust instrument provides for the trustee's compensation, the
trustee is entitled to be compensated in accordance with the trust
instrument. The court may fix or allow greater or lesser compensation
than could be allowed under the terms of the trust in certain
circumstances. Cal. Prob. Code  15680 (West 2000). If the trust
instrument does not specify the trustee's compensation, the trustee is
entitled to reasonable compensation under the circumstances. Cal.
Prob. Code  15681 (West 2000)."
http://home.pon.net/jmt/law/twol/ep/epn/trusts.htm

Read the California Probate Code  15681 
http://caselaw.lp.findlaw.com/cacodes/prob/15680-15688.html

******************************************

Second, a suggested percentage from two sources:

"Trustees are entitled to reasonable compensation for the services
performed for the trust. Often the trust document will specify an
amount or a limitation. If it does not, a Trustee is entitled to
compensation in the same manner as would anyone else performing
similar management or investment services. This usually depends upon
the time involved, the responsibilities undertaken, the results
achieved and the magnitude of the problems encountered. ***A good rule
of thumb, generally used by corporate trustees in California in
estimating Trustees' fees, is one percent of the principal balance of
the trust per annum."***
http://www.tdoyle.com/newarticlestest4.htm

Also, see section 14.110, page 206, "Compensation Guidelines for
Management of the Estate," a San Francisco Superior Court document at
http://sfgov.org/site/uploadedfiles/courts/rule_14.pdf where it reads,
"Ordinarily, annual fees for guardians, conservators and trustee shall
not exceed the following: One percent (1%) of the fair market value of
assets at the end of the accounting period."

One percent seems reasonable and an accepted standard in lieu of a stated fee.

******************************************

And finally, just in case you're also the Executor, some helpful tax info:

"The Executor is entitled to reasonable compensation, often limited to
a certain percentage (e.g., 5%) of the property in the probate estate.
(Extra compensation, related to handling some special matter, may be
allowed by the court.) That does not mean the Executor automatically
gets that much....F.Y.I. Common Question: "I've recently been
appointed as Executor, and also a beneficiary under Grampa?s Will. Am
I better off, tax-wise, taking my fee or not?" The answer will vary,
but the factors to consider are as follows:

"From the beneficiary's standpoint, inheritance money is free from
federal income tax. (The federal levy - if any - is an estate tax,
taken "off the top" before the beneficiary gets his/her share.) The
fee to an Executor, however, is ordinary, taxable income to him. These
facts weigh in favor of the beneficiary/Executor not taking his fee,
and obtaining a slightly larger (income tax free) inheritance. So if
the only beneficiaries are you and your spouse, for example, then it
makes sense to skip the fee, for this reason."
http://www.robinestes.com/trusts.html


I am not an attorney and I do not present this answer as legal advice
- it's simply my research results quoting what appears to be a fair
and established estate trustee fee perentage.  To be 100% certain, I
would ask an attorney if this 1% is an accepted fee (and the CA court
legal record appears to already back that up). Of course, I believe
you may choose less if you desire - from this laywoman's standpoint,
less shouldn't be a problem.


Should you require any clarification, please request it and I will be
happy to respond further.

Best regards,
journalist-ga


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anon8-ga rated this answer:5 out of 5 stars
Wish my attorneys and accountants were as timely and articulate.  Thanks much.

Comments  
Subject: Re: Compensation for Trustee of Living Trust in California
From: journalist-ga on 14 Jun 2005 12:11 PDT
 
Thank you, Anon8, for your kind words and the five-star rating of my
answer!  I'm delighted you are pleased with the results of my
research.  :)

Best regards,
journalist-ga

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