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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

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Presentation Transcript
common law
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
Modern Law

Assuming trust instrument is silent:

  • 1. Court Determination
    • Trustee petitions court for compensation approval.
modern law1
Modern Law
  • 2. Trustee Determination
    • Trustee determines reasonable compensation.
    • Trustee takes from trust.
    • Interested persons may sue trustee for taking excessive compensation.
modern law2
Modern Law
  • 3. Schedule or Scale
    • Based on, for example,
      • Value of trust
      • Amount of trust income
texas 114 061
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
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
Factors to Determine Reasonable Fee
  • 1. Gross income of trust
factors to determine reasonable fee1
Factors to Determine Reasonable Fee
  • 2. Success or failure of trust administration
factors to determine reasonable fee2
Factors to Determine Reasonable Fee
  • 3. Trustee’s skill and experience
factors to determine reasonable fee3
Factors to Determine Reasonable Fee
  • 4. Trustee’s fidelity or disloyalty
factors to determine reasonable fee4
Factors to Determine Reasonable Fee
  • 5. Amount of trustee’s liability exposure and responsibilities assumed
factors to determine reasonable fee6
Factors to Determine Reasonable Fee
  • 7. Custom in the community
factors to determine reasonable fee7
Factors to Determine Reasonable Fee
  • 8. Character of work
    • Skill and judgment, or
    • Routine
factors to determine reasonable fee8
Factors to Determine Reasonable Fee
  • 9. Trustee’s estimate of value of services