Trustee Compensation.

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Presentation transcript:

Trustee Compensation

Common Law No compensation unless settlor provided for compensation in the trust. Policy – fear that trustee would act to increase compensation even if not in trust’s best interests.

Modern Law Assuming trust instrument is silent: 1. Court Determination Trustee petitions court for compensation approval.

Modern Law 2. Trustee Determination Trustee determines trustee’s own “reasonable compensation.” Trustee takes from trust. Interested persons may sue trustee for taking excessive compensation.

Modern Law 3. Schedule or Scale Based on, for example, Value of trust Amount of trust income

Texas -- § 114.061 Presumption = reasonable compensation Exceptions: Settlor provides otherwise No compensation Exact amount Method Court may deny compensation if trustee breaches the trust. § 113.082

Compensation Issues Should settlor waive compensation? Should settlor provided a fixed fee? Should settlor “shop around” for fees if using corporate trustee?

Factors to Determine Reasonable Fee 1. Gross income of trust

Factors to Determine Reasonable Fee 2. Success or failure of trust administration

Factors to Determine Reasonable Fee 3. Trustee’s skill and experience

Factors to Determine Reasonable Fee 4. Trustee’s fidelity or disloyalty

Factors to Determine Reasonable Fee 5. Amount of trustee’s liability exposure and responsibilities assumed

Factors to Determine Reasonable Fee 6. Time spent

Factors to Determine Reasonable Fee 7. Custom in the community

Factors to Determine Reasonable Fee 8. Character of work Skill and judgment, or Routine

Factors to Determine Reasonable Fee 9. Trustee’s estimate of value of services