The person who controls a trust is called the trustee. If you’re choosing a trustee, or if you’re a beneficiary of a trust, one concern is how much that trustee gets paid for managing the assets for the benefit of the beneficiaries. The answer depends on the terms of the trust, the reasonableness of the compensation and whether the trustee’s actions.
Terms of the trust
If you are concerned about how much the trustee is paid, first, look to the terms of the trust itself (the trust documents). The person who created the trust (the settlor) can specify trustee payment (fixed fee, formula, percentage, etc.).
However, a court can subsequently allow for more or less payment, if this amount becomes unreasonable. For example, if trustee compensation is set at 1% of the value of the trust assets per year, this can be a wildly different number year to year. At $100,000, that is $1,000, but at $100,000,000, the compensation is $1,000,000. Depending on the amount of work involved, both amounts could be reasonable, or they both could be unreasonable, which is where a court challenge could flow to challenge the trust documents.
Reasonableness of the trustee’s compensation
The trustee’s compensation must be reasonable under the circumstances in Florida. Unfortunately, Florida does not define reasonable compensation in the law, but courts use several factors to determine whether a trustee’s compensation is reasonable in a particular case.
First, the court will look at the trust itself and the nature of the trust, i.e., its assets, the types of assets, value, size, etc. Second, courts look to the skill required to administer such a trust and the time and labor required to perform these duties. Third, courts look at whether the trustee has been successful at their duty and the level of their success, as well as their fidelity of the trustee to the trust and the trust’s beneficiaries. Finally, the court will look at the trustee themselves (their qualifications, experiences, etc.), the prevailing rates of trustee services in Miami-Dade County and any other relevant factor the court deems necessary to examine.
Trustee’s actions
Even if your trustee receives a set amount each year, you may notice deviations from time to time, if the trustee must take additional actions or render additional services, like legal, accounting, investment or tax services that were not part of that base compensation. If so, then the trustee may also be entitled to reasonable compensation for those additional services, in addition to their base trustee fee. This is why it is important to get a comprehensive fee upfront when selecting a trustee.