Trustee Compensation: How Much Are Trustees Paid?

What is a Trustee?

One that creates a Living Trust (or Irrevocable Trust, or other kind of Trust) is called the Settlor or Trustor.  The Beneficiary receives the benefit of the Trust and is said to hold the equitable title to the property.  The Trustee hold the legal title and is essentially the manager of the property for the benefit of the Beneficiary.  Most of the time when a couple or individual sets up a Revocable Living Trust, they will be the Settlor, Trustee, and the primary Beneficiaries.  In the case of a married couple, they will be considered co-trustees.  A co-trustee can usually act alone, or in conjunction with the other co-trustee, and takes over if the first Trustee dies or becomes incapacitated.

 

What is a Successor Trustee?

A Successor Trustee takes over as Trustee upon the occurrence of a specific event.  Usually this event is when the Trustee dies or loses capacity.  The successor Trustee is usually a trusted family member or friend of the family.  Sometimes the Successor Trustee will be a Professional Fiduciary Trustee.  This may be advantageous in a variety of situations including where the Trustor has no family, where the children Beneficiaries don’t get along, or where the Trust may continue for a long period of time after the Trustor death.

 

Trustee Compensation

The Trust document itself can detail how much the Trustee compensation will be, and how it is to be paid.  California Probate Code section 15680 says in part that if the Trust provides for compensation, then the Trustee is entitled to such compensation, and that the amount may be adjusted up or down by the court if the Trustee duties are substantially different from those contemplated when the trust was created, where the compensation in accordance with the terms of the trust would be inequitable or unreasonably low or high, or in extraordinary circumstances calling for equitable relief.  Further, the Probate Code dictates that any such raising or lowering of compensation will only be applied prospectively after the court order is made.

 

California Probate Code also says that if the Trust document does not specify what the Trustee compensation will be, then the Trustee is entitled to “reasonable compensation” (Probate Code section 15681).  Moreover, the court can order that the compensation continue for as long as the court determines proper in either situation – where the Trust document details compensation, and when the Trust document does not (Probate Code section 15682).

 

There are other rules and situations that affect Trustee compensation that will not be discussed here in this particular blog. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

Please feel free to give me a call and we can establish your Living Trust or other estate planning objectives today. 

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

Sunday, 01 May 2016 23:11

What are Trustee Powers

Written by

Trustee Powers

 

 

Who is a Trustee?

 

A Trustee is the person or persons that manage the Trust property for the benefit of the Beneficiary.  The original Trustee is usually the person that establishes the Trust.  Married persons are usually co-trustees and may act together or independently.  The successor trustee usually takes over after some specific event such as the death of one or both Trustees, or the incapacity of the original Trustee. 

 

What are Trustee Powers?

 

What is the difference between a Trustee power, and a Trustee duty?  A duty must be performed by the Trustee, and a power is different in that a Trustee has discretion to exercise the power if he or she chooses.  California Probate Code section 16202 says: The grant of a power to a trustee, whether by the trust instrument, by statute, or by the court, does not in itself require or permit the exercise of the power. The exercise of a power by a trustee is subject to the trustee’s fiduciary duties.

 

A Trustee has the powers, without need for court order, that are granted by the Trust document, conferred by statute (unless limited in the Trust document), and the power to perform any act that a trustee would perform for the purposes of the trust under the standard of care provided in Section 16040 or 16047 of the California Probate Code (unless limited in the Trust document).

 

California Probate Code section 16220 thru 16249 addresses the specific powers of the Trustee and include (but are not limited to) such powers as:

•             the power to collect, hold, and retain trust property received from a settlor or any other person

•             the power to accept additions to the property of the trust from a settlor or any other person.

•             the power to continue or participate in the operation of any business or other enterprise that is part of the trust property and may effect incorporation, dissolution, or other change in the form of the organization of the business or enterprise

•             the power to acquire or dispose of property, for cash or on credit, at public or private sale, or by exchange.

 

For the drafter of a Trust document, confusing a duty with a power can create problems down the road.  If the drafter attempts to modify a Trustee duty by conferring a power to the Trustee is a mistake.  If a clause says that the Trustee has the power to hold property without diversification and does just that by holding a family held business or property, and that property goes down in value, can the beneficiaries surcharge the Trustee for the loss?  A Trustee will be financially liable for losses under certain circumstances, and must therefore take the job of Trustee seriously.  Recall Probate Code 16202 stated above that says: The grant of a power to a trustee, whether by the trust instrument, by statute, or by the court, does not in itself require or permit the exercise of the power. The exercise of a power by a trustee is subject to the trustee’s fiduciary duties.  The court would need to decide if the Trustee is liable under the circumstances.  Care must be taken to avoid situations such as these.

 

I would love to help you and your family.  Call me and we can create your Living Trust or other Estate Planning documents.

See lots of estate planning information on my website at: www.myestate-plan.com

 

Thanks for reading my blog.

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

****************

Avoiding a Trustee Conflict of Interest

 

So as we discussed in another blog (see "Trustee Duties" here: trustee duties blog ), one of the Trustee duties is to avoid a conflict of interest, and to avoid “self-dealing”.  The California Probate Code lists statutory duties of the Trustee in Probate Code §§16001–16015 which includes (among others) a Duty of loyalty, to deal impartially with beneficiaries, also to avoid conflicts of interest and a duty not to undertake adverse interests.  So you may be asking yourself “what’s the big deal?”  Let’s use this example because it can come up quite often. The Settlor (usually a parent or parents) sets up an estate plan that includes a Revocable Living Trust with their two children as beneficiaries.  The oldest child is named as the Trustee because he or she is more responsible with money and is involved in the family business.  Upon the occurrence that the child becomes the Trustee, what is he or she to do about the activities of the family business if it is a Trust property?  If the normal duties are not addressed and properly dealt with, the Trustee will potentially be violating some of the California Probate Code statutory duties.  In taking a salary, contemplating a raise, even simply continuing the business by not selling it in order to diversify could be a breach of his or her duties as trustee.  This is not likely what the parents wanted when they established the Living Trust in the first place.   Perhaps the biggest worry for the Settlor is that a Trustee can be surcharged for loss of value of trust property if there was a breach of duty by the Trustee.  Therefore, a Trustee must be very careful, and the attorney must carefully draft the Living Trust to avoid potential pitfalls.

 

Careful drafting of the revocable trust and the asking of proper questions by a qualified attorney is paramount.  Likewise, it is important for the client to avoid only telling the attorney what the client thinks the attorney “needs to know”.  There are many things the average person thinks unimportant with respect to estate planning.  The more open a person is with their attorney, the better the result will be.  For this reason and others, I feel a “document system” like LegalZoom will never compete with an attorney on achieving the results you want, AND avoiding the unforeseen potential problems with answering a computer’s questions, then getting a document filled with “boilerplate language” and a lawsuit among beneficiaries down the road.

 

 

Let’s contemplate a slightly different scenario.  Maybe you don’t own a business, but instead just a home.  You’d like to allow one of the beneficiaries to live in the home for a time.  The standard rules would suggest that a Trustee would be breaching a duty in not making the property productive, or in “self-dealing” by taking advantage of a trust property.  The amount of rent may be disputed, and the issue of not diversifying could also be shown pretty easily. 

 

In a future blog we will address the difference between the conferring of Trustee powers and the modification of Trustee duties.  Care must be taken here also because sometimes the unwary drafter will convey a power instead of properly modifying a trustee duty.

 

See lots of estate planning information on my website at: www.myestate-plan.com

  

Thanks for reading.  I’m never too busy to get your estate plan in order and help address your particular situation.  Please give me a call and let’s start your Estate Plan today!  It is never too soon to plan.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

Wednesday, 13 April 2016 01:00

Trustee Duties

Written by

What are a Trustees Duties?

 

Duties of a Trustee 

California Probate Code §16000 requires that the Trustee shall administer the trust according to the trust instrument and, except to the extent the trust instrument provides otherwise, according to the California Probate Code that addresses “Trust Law.” The California Probate Code lists statutory duties of the Trustee in Probate Code §§16001–16015 which includes the following:

  • Duty of loyalty;
  • Duty to deal impartially with beneficiaries;
  • Duty to avoid conflicts of interest;
  • Duty not to undertake adverse interests;
  • Duty to take control of trust property;
  • Duty to make trust property productive;
  • Duty to keep trust property separate and identified;
  • Duty to enforce claims;
  • Duty to defend actions;
  • Duty not to delegate acts to others if Trustee can reasonably perform the act, and if the Trustee must delegate, he or she must supervise the work;
  • Duties concerning co-trustees;
  • Duty to apply any special skills of the trustee;
  • Duty to make distributions of income; and

Other duties include:

  • The Duty to perform prudent investing;
  • The duty to report and account to beneficiaries as well as supply notices when a trust becomes irrevocable or the trustee changes;
  • The duty to follow Probate Code §§16080–16082 with regard to any discretionary powers; and
  • There are special duties of trustees of charitable trusts.

There are other duties.  See the California Probate Code for more.

California Probate Code that deals with the Duties of Trustee are found here:

http://leginfo.legislature.ca.gov/faces/codes_displayexpandedbranch.xhtml?tocCode=PROB&division=9.&title=&part=4.&chapter=1.&article=

As mentioned at the beginning of this blog, the Trustee shall administer the trust according to the trust instrument and, except to the extent the trust instrument provides otherwise, according to the California Probate Code.  That means that the Trustee follows the instructions in the trust document, the Trustee follows the California Probate Code rules, and the Trustee follows any of the Probate Code rules as modified or eliminated in the trust document.

 

How do Trustee Duties Affect my Choosing a Trustee? 

Who the Trustee is, his or her relationship with the person that creates the Trust, and his or her relationship with any other beneficiaries can conflict with the normal duties of the Trustee.  Therefore, the attorney must be very capable and careful to ask the correct questions prior to drafting your estate planning documents.  I will discuss these potential conflicts in more detail in a later blog.

As always, if you need estate planning, please call me and I would love to work with you.  If not me, please do contact an attorney because I believe that only a trained attorney can ask the proper questions to effectuate your wishes with as little discord between beneficiaries and trustees – and do so better than a computer program or a LegalZoom type system can do.

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

My most important job is to listen to your wishes then suggest solutions.  Call today and let’s start planning!

Thanks for reading!

Dan Powell

1-619-980-2297

 

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

Tuesday, 12 April 2016 01:51

Who Can Serve as a Trustee?

Written by

Who Can Serve as a Trustee?

Qualification to Serve as a Trustee 

Generally speaking, to serve as a Trustee of a Revocable Living Trust, or Irrevocable Trust or the like, the Trustee must have the capacity to acquire and hold property and to administer the Trust.  In California, you may also use a licensed private fiduciary to serve as Trustee.  It would appear the more important question to ask yourself is not what the legal requirements are, but who do I trust that will do the best job as Trustee. 

The person or persons that establish the Trust are called the Settlor or Trustor.  Most of the time, upon setting up a Trust, the person will be the Settlor, the Trustee, and the Beneficiary.  With married couples, the couple will usually be co-trustees.  The Trust will allow either spouse to act alone should the other spouse die or become incapacitated.  Also, the Trust will name a successor trustee or co-trustees. 

 

Whom Shall I Choose to be my Trustee? 

The Trustee’s job will be to administer your estate, and follow the instructions you provide in the Trust document.  These tasks include things like paying bills, dealing with taxes, manage Trust property, collect any income, save and invest, provide for your loved ones, buy and sell property and assets, maintain accurate records, and keep matters in good order.

As you can see, there are several factors to consider when trying to decide on a Trustee.  Ask yourself questions like:

  • Is my Trustee familiar with my family and any family dynamics?
  • Is my Trustee familiar with my assets?
  • Is the potential Trustee good with money?
  • Would the Trustee be organized and pay attention to details?
  • Would my choice of Trustee be overwhelmed in managing my particular assets?
  • Does the Trustee have the time to serve as Trustee?
  • Will the Trustee get along with the Beneficiary or Beneficiaries?
  • If you will be using co-trustees, do they get along with each other?
  • Is the proposed Trustee likely to have health or financial problems?

 

I can be of assistance in helping you choose a Trustee or successor Trustee.  Call me today and we can start planning. 

 

The California Probate Code deals with Trusts, Trustees, and Beneficiaries among quite a few things and the General Provisions on Trustees can be found here:

http://leginfo.legislature.ca.gov/faces/codes_displayexpandedbranch.xhtml?tocCode=PROB&division=9.&title=&part=3.&chapter=1.&article=

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

My most important job is to listen to your wishes then suggest solutions.  Call today and let’s start planning!

 

Thanks for reading!

 

Dan Powell

 

1-619-980-2297

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

Sunday, 10 April 2016 18:57

What is a Trustee

Written by

What is a Trustee?

 

Let’s Start with a Definition of a Trust 

As defined elsewhere in my blog, there are many names for a Revocable Trust including Living Trust, Revocable Living Trust, Inter Vivos Trust, or even just Trust.  For that matter, there are many different types of Trusts such as an Irrevocable Trust, Special Needs Trust, Charitable Remainder Trust, Standalone Retirement Trust, etc.  But for now we will just stick with discussing a Revocable Living Trust.  A great way to think of a Living Trust is to picture it as a bucket that you create, put items into, take items out of, and retain the control over.  You hold your own bucket.  You can even destroy your bucket – that’s what makes the Trust revocable.  Further, you can designate who holds your bucket should you become incapacitated, or upon your passing (when you “kick the bucket”).   The creator of a Trust is called a Trustor or Settlor.

 

Who is a Trustee? 

So the Trustee is the person or persons that hold your bucket.  The Trustee manages the Trust property.  Usually people serve as the initial Trustee, or if they are married, then they serve as co-trustees.  In the case of married couples, the Trust is normally structured so that upon the death or incapacity of one of the spouses, the other spouse can serve as a sole trustee with little to no additional steps.  When the initial Trustee (or trustees) no longer serve, then a Successor Trustee begins to serve and manage the Trust.  Any of these Trustees, whether it’s the initial Trustee or successor Trustee, can be a “professional fiduciary trustee”.  The professional fiduciary can be a corporate trustee, or a licensed professional fiduciary.

 

 

California Business and Professions Code Section 6500 – 6502 (bpc:6500-6502) deals with “Licensed Professional Fiduciary” requirements and definitions.  It can be read here:

 

http://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=BPC&division=3.&title=&part=&chapter=6.&article=3

 

I will discuss the benefits and drawbacks to a licensed professional fiduciary in another episode of my blog.

Thanks for reading, and please remember that if you have particular issues or questions, please consult a licensed attorney.

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

 

My most important job is to listen to your wishes then suggest solutions.  Call today and let’s start planning!

Thanks for reading!

Dan Powell

1-619-980-2297

 

 

****Reminder****

Just like my website, nothing in this blog is intended as legal advice. If you need legal advice, contact an attorney licensed to practice in your jurisdiction. I am licensed to practice law in California.  Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here. This is why I speak in generalities. Thanks again for reading.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.

 

Latest blog posts

Blog Categories