Charles W. Ranson
Expert Witness
Wealth Management and Trust & Estates
Executor and Trustee Fees
Executors (personal representatives), trustees, attorneys, and other professionals involved in the administration of probate and trust estates are entitled to reasonable compensation for their services.
Executors named in a decedent’s will to manage and settle the decedent’s real and personal property are entitled to compensation or commissions as provided in the will or prescribed by state statute, which varies from state to state. A will in probate is supervised by the probate court in the jurisdiction of the decedent’s residency. Compensation or commissions can be raised or lowered by the probate court depending on various factors, including (but not limited to) the complexity of the estate and any special skills or knowledge the executor has in settling unique real property, estate litigation, or estate tax audits. If a corporate fiduciary is named executor, when it accepts the appointment it will either negotiate the future fee with the client, or will agree to compensation as determined by the institution’s fee schedule.
For grantor trusts or testamentary trusts that name a corporate or professional trustee, a fee agreement is reached prior to the trustee’s acceptance of the appointment. Individual trustees, whether as friends and family of the grantor or through a testamentary trust, are entitled to compensation either as trustees or successor trustees. If the trust or will does not provide for a specific fee or means of determining a fee, the trustee and beneficiaries must come to an agreement as to the amount and frequency of compensation to be paid to the trustee. If an agreement cannot be reached, the parties look to a court of jurisdiction to determine trustee fees. A corporate trustee is normally entitled to its standard fee schedule.
Each state has a procedure to determine disputed trustee fees.
Florida fee disputes are litigated in probate courts. Reasonable trustee fees are determined by the legal precedent set in the 1958 Florida Supreme Court ruling of West Coast Hospital Association v. Florida National Bank. The court ruled that, in determining reasonable trustee fees, 11 factors must be considered, including the amount of capital received and distributed, wages or salary customarily granted to agents or servants performing similar work, success or failure of the administration of the trust, any unusual skills or expertise that the trustees in question may have provided, the fidelity or lack thereof displayed by the trustees, the amount of risk and responsibility assumed, the time commitment required, the custom in the community as allowed to trustees by settlors or courts as to charges exacted by trust companies and banks, the character of the work done in the course of the administration (whether routine or involving skill and judgment), the estimates the trustees have given for the value of their services, and payments made by beneficiaries to the trustees and intended to be applied for their compensation.
Georgia Statute 53-12-210 determines the compensation of the trustee of an irrevocable trust. Georgia very specifically prescribes how both individuals and corporate trustees receive compensation for trustee services. In a case where there is no fee agreement and the trust becomes irrevocable, the beneficiaries can enter into a fee agreement with the trustee without court order. When a bank becomes the trustee of an irrevocable trust, it is permitted to charge its published fee schedule. When an individual becomes the trustee of an irrevocable trust and no fee agreement can be reached with the beneficiaries, Georgia law prescribes a fee determined by a percentage of assets. The fee may range from 1.75% on the first $500,000, 1.25% on the next $500,000, 1% on the next $1 million, 0.85% of the next $3 million, to 0.5% of all values over $5 million.
California Probate Code sections 15680–15688 prescribe that, if a trust instrument provides for trustee 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 any of the following circumstances: (a) where the duties of the trustee are substantially different from those contemplated when the trust was created, (b) where the compensation in accordance with the terms of the trust would be inequitable or unreasonably low or high, (c) in extraordinary circumstances calling for equitable relief, or in which the court allows greater or lesser compensation under supervision, which applies only prospectively to actions taken in administration of the trust after the order is made.
See an example of a case involving trustee fees.