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The default rule for trustee compensation is "reasonable compensation"

Trustee compensation can be tricky. A trust document can explicitly state how much a trustee gets compensated or a trust document can follow the "reasonable compensation" as set forth in California Probate Code Section 15681.

What does "reasonable compensation" mean exactly? A lot of times in law there is not a set answer, but factors to balance. Rule 7.776 of the California Rules of Court specify 8 factors to balance to determine trustee compensation:

(1) The gross income of the trust estate;

(2) The success or failure of the trustee’s administration;

(3) Any unusual skill, expertise, or experience brought to the trustee’s work;

(4) The fidelity or disloyalty shown by the trustee;

(5) The amount of risk and responsibility assumed by the trustee;

(6) The time spent in the performance of the trustee’s duties;

(7) The custom in the community where the court is located regarding compensation authorized by Trustors, compensation allowed by the court, or charges of corporate trustees for trusts of similar size and complexity; and

(8) Whether the work performed was routine, or required more than ordinary skill or judgment.

Basically, every trust is different and every trustee is different. But, it is the trustee's duty to be honest in their fee and it is the beneficiaries' responsibility to uphold and ensure that the trustee is honest and fair.

Professional trust companies that act as trustees often charge an annual rate of 1-2% based on a fixed percentage of the value of the trust estate. Other professional trustees will charge a reasonable hourly rate and keep specific time records. Most courts will accept 1% as a default, but the trustee should consult with an estate planning attorney.

When will a Trustee not be compensated? Under California Probate Code Section 16420(a)(7) the court can deny compensation if the Trustee commits a breach of trust or threatens to commit a breach of trust or if you don't want your trustee to be compensated you need to explicitly state that in your trust.

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