Trustee Compensation Laws

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What is Trustee Compensation?

When creating a trust, it is necessary to select a trustee.  This is the person who will hold the property in trust before it is transferred from the owner to the beneficiary.  This person should be selected in a careful manner, and should be a trustworthy person who does not stand to gain personally from the transaction.

In some cases, the owner of the property may decide to provide monetary payment for the services of the trustee.  This is known as “trustee compensation”.  This may be necessary in some cases, as the trustee must often exercise their business and financial skills by investing the trust account contents when necessary. 

Is Trustee Compensation Required?

State laws may vary on the rules that govern trustee compensation.  In most cases, it’s up to the creator of the trust to determine whether or not the trustee is entitled to compensation.  This should be stated clearly in the trust agreement.  There are several types of trust compensation arrangements:

If state laws are silent on trustee compensation rights, the trust will usually provide “reasonable compensation” for the trustee.  This is determined according to various factors, including the types of tasks performed by the trustee, as well as the nature of the property that they are managing.  The trustee may also waive their rights to trustee compensation if they like. 

What if There are Any Trustee Compensation Disputes?

A common trustee compensation dispute is where a beneficiary is contesting the amount of compensation that the trustee is entitled to.  For instance, if the trustee has performed poorly, or has actually caused a beneficiary losses, it could be reflected in their compensation amount.  In serious cases, the trustee may even be subject to removal, especially in cases where the trustee breaches their fiduciary duty

Should I Hire a Lawyer if I Need Help With Trustee Compensation Issues?

Trustee compensation laws and rules may vary by state.  To avoid any legal issues, a trust agreement should include very clear and specific instructions regarding trustee compensation.  If you have any issues or concerns regarding trustee compensation, you may wish to hire a lawyer for help.  Your attorney can help with the drafting or editing of such documents, and can also represent you in court if you need to file a lawsuit. 

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Last Modified: 01-28-2014 02:48 PM PST

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