“Is My Fee Reasonable?” Defending Your Trustee Compensation in California

You’ve dedicated time, effort, and diligence to managing a Trust, upholding your fiduciary duty to the beneficiaries and honoring the Settlor’s intent. Now, it’s time to be compensated for your work. But determining and justifying Trustee Compensation in California isn’t always straightforward, especially if the trust document is silent or beneficiaries raise questions. How do you ensure your fee is fair and defensible, potentially even seeking the Probate Court’s blessing?

At Burrey Law Group, we frequently advise trustees on compensation matters and defend them when fees are challenged. Here’s what California trustees need to know:

The Standard: “Reasonable Compensation”

If the trust instrument doesn’t specify your fee (or specifies an amount that’s now unreasonable), California Probate Code § 15681 states you are entitled to “Reasonable Compensation under the circumstances.” Unlike probate executor fees, there’s no fixed statutory schedule. So, what’s “reasonable”?

Justifying Your Fee: The Rule 7.776 Factors

California Rule of Court 7.776 provides guidelines the court may consider when evaluating trustee fees. Even if you aren’t seeking court approval initially, understanding these factors helps justify your compensation:

• Trust Income & Success: Was the administration successful in generating income or preserving/growing principal?
• Skill & Expertise: Did you bring unusual skills (e.g., managing a business, complex real estate) to the role?
• Risk & Responsibility: What level of risk and responsibility did you assume?
• Time Spent: How much time did you dedicate? (Crucial: Keep detailed time logs, even if charging a percentage!)
• Community Custom: What do corporate trustees or professional fiduciaries typically charge for similar trusts in your area?
• Complexity: Was the work routine, or did it require extraordinary skill and judgment?

To Petition or Not to Petition? Seeking Court Approval

While not always required (unless the trust mandates it or you seek fees different from the trust terms), proactively petitioning the court for approval of your compensation, often as part of a formal Accounting (under Probate Code § 17200(b)(5)), can be a wise strategic move, especially when:

• Tension Exists: You anticipate beneficiary objections or hostility.
• Complexity Abounds: The administration involved significant challenges or special skills.
• Certainty is Desired: You want the finality and protection of a Court Order approving your fees and actions for the accounting period.

Filing a petition necessarily puts your requested compensation (and potentially your attorney’s fees paid from the trust as expenses of administration) before the judge for review. This invites scrutiny, but the resulting order provides significant protection against later claims regarding those approved fees.

Preparing Your Case (Whether Petitioning or Responding to Objections)

Whether seeking pre-approval or defending fees already taken, meticulous preparation is key:

• Detailed Records: Time logs, descriptions of tasks performed, explanations of how actions benefited the trust – these are vital. “Block billing” descriptions are often insufficient.
• Clear Accounting: Ensure any accounting submitted meets the statutory requirements (Probate Code § 1060 et seq.) and clearly shows compensation taken.
• Justification: Be prepared to explain why your fee is reasonable based on the Rule 7.776 factors.

Defending Against Objections

If a beneficiary objects to your compensation (either via an objection to your accounting or a separate petition under § 17200(b)(9) to review fees), your thorough records and understanding of the reasonableness factors become your primary defense tools.

You’ve dedicated time, effort, and diligence to managing a Trust, upholding your fiduciary duty to the beneficiaries and honoring the Settlor’s intent. Now, it’s time to be compensated for your work. But determining and justifying Trustee Compensation in California isn’t always straightforward, especially if the trust document is silent or beneficiaries raise questions. How do you ensure your fee is fair and defensible, potentially even seeking the Probate Court’s blessing?

At Burrey Law Group, we frequently advise trustees on compensation matters and defend them when fees are challenged. Here’s what California trustees need to know:

The Standard: “Reasonable Compensation”

If the trust instrument doesn’t specify your fee (or specifies an amount that’s now unreasonable), California Probate Code § 15681 states you are entitled to “Reasonable Compensation under the circumstances.” Unlike probate executor fees, there’s no fixed statutory schedule. So, what’s “reasonable”?

Justifying Your Fee: The Rule 7.776 Factors

California Rule of Court 7.776 provides guidelines the court may consider when evaluating trustee fees. Even if you aren’t seeking court approval initially, understanding these factors helps justify your compensation:

• Trust Income & Success: Was the administration successful in generating income or preserving/growing principal?
• Skill & Expertise: Did you bring unusual skills (e.g., managing a business, complex real estate) to the role?
• Risk & Responsibility: What level of risk and responsibility did you assume?
• Time Spent: How much time did you dedicate? (Crucial: Keep detailed time logs, even if charging a percentage!)
• Community Custom: What do corporate trustees or professional fiduciaries typically charge for similar trusts in your area?
• Complexity: Was the work routine, or did it require extraordinary skill and judgment?

To Petition or Not to Petition? Seeking Court Approval

While not always required (unless the trust mandates it or you seek fees different from the trust terms), proactively petitioning the court for approval of your compensation, often as part of a formal Accounting (under Probate Code § 17200(b)(5)), can be a wise strategic move, especially when:

• Tension Exists: You anticipate beneficiary objections or hostility.
• Complexity Abounds: The administration involved significant challenges or special skills.
• Certainty is Desired: You want the finality and protection of a Court Order approving your fees and actions for the accounting period.

Filing a petition necessarily puts your requested compensation (and potentially your attorney’s fees paid from the trust as expenses of administration) before the judge for review. This invites scrutiny, but the resulting order provides significant protection against later claims regarding those approved fees.

Preparing Your Case (Whether Petitioning or Responding to Objections)

Whether seeking pre-approval or defending fees already taken, meticulous preparation is key:

• Detailed Records: Time logs, descriptions of tasks performed, explanations of how actions benefited the trust – these are vital. “Block billing” descriptions are often insufficient.
• Clear Accounting: Ensure any accounting submitted meets the statutory requirements (Probate Code § 1060 et seq.) and clearly shows compensation taken.
• Justification: Be prepared to explain why your fee is reasonable based on the Rule 7.776 factors.

Defending Against Objections

If a beneficiary objects to your compensation (either via an objection to your accounting or a separate petition under § 17200(b)(9) to review fees), your thorough records and understanding of the reasonableness factors become your primary defense tools.

Navigating trustee compensation rules and defending against beneficiary challenges requires experienced legal counsel. Burrey Law Group advises trustees on setting reasonable fees, preparing defensible accountings, petitioning for court approval when strategic, and vigorously defending trustees when compensation claims arise in litigation.

If you have questions about your trustee compensation or are facing objections, contact Burrey Law Group today for a confidential consultation.

Navigating trustee compensation rules and defending against beneficiary challenges requires experienced legal counsel. Burrey Law Group advises trustees on setting reasonable fees, preparing defensible accountings, petitioning for court approval when strategic, and vigorously defending trustees when compensation claims arise in litigation.

If you have questions about your trustee compensation or are facing objections, contact Burrey Law Group today for a confidential consultation.