Now that you have chosen a successor trustee who will be in charge of administering your trust after you pass, you may wish to consider including a provision addressing his right to compensation. Serving as a trustee is a lot of work and comes with a great deal of responsibility. If you are appointing a friend or loved one to serve in this role, chances are good that you would like them to receive a fair fee in exchange for their time and efforts.
Options for Addressing Trustee Fees in Your Living Trust
When it comes to actually deciding upon compensation for your successor trustee, you have several options as you draft your living trust. These include the following:
- Include a provision that states a trustee may pay himself reasonable compensation without prior court approval.
- Include a provision that states the trustee is entitled to a specific dollar amount as a trustee fee.
- Include a provision that states the trustee is entitled to a certain percentage of the trust assets as a fee for services.
- Include a provision that states the trustee is entitled to a fee equal to the fee schedule of an Orange County bank or trust company for similar services.
By far, the most common provision used when creating an estate plan is to state that the trustee is entitled to reasonable compensation for his services. This provision is in line with California state law on the subject of trustee fees. While there is no clear definition as to what constitutes a reasonable fee, it is generally understood to mean the fee that a professional trustee would charge to administer the trust, given the particular circumstances. It is fairly easy to make this determination since most professional trustees utilize straightforward fee schedules to outline compensation for their services. They are generally based on the overall size of the estate, while taking into consideration certain other factors such as location and complexity of the administration.
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