In Florida, trustee compensation is guided by Florida statutes which specifically state that trustees are entitled to reasonable compensation under the circumstances. This is obviously open to interpretation, which makes the determination of the exact amount of compensation challenging. There are a number of different ways in which fees paid to trustees are calculated, which can sometimes involve litigation in extreme cases.
Generally speaking, trustee fees range from 1% to 3% of the trust assets. For larger estates, the fees are normally closer to 3% as the amount of assets is considerably larger and more complex to administer. The fees themselves are set either through the trust instrument itself or in a separate agreement with the trustee. Otherwise, if neither of these avenues are chosen the circuit court holding jurisdiction will be tasked with reviewing the situation and determining the appropriate fee.
Court Adjustments to Trustee Compensation
There are certain instances where the court may decide to adjust a trustees compensation, even if the trust does in fact specify the trustees compensation. This typically occurs if the trustee’s duties are substantially different from those originally intended when the trust was created, especially if the compensation is unreasonably high or low.
Essentially, whether or not the trust itself provides the basis, amount and form of compensation does not create a hard and fast rule as to the trustees compensation. Instead, the amount of compensation rests solely at the discretion of the court with jurisdiction handling the estate, which when in doubt will rely upon established case law as a guide.
Because of the fact that the court lacks a statutory guideline for determining the reasonableness of trustee fees, they normally look into the specific duties and responsibilities of a trustee under the trust in question. At this point, it is up to the courts best judgment as to whether or not the trustee fees are appropriate or if they need to be modified. There are multiple factors that go into this, which are specific to each individual estate.
Factors in Determining a Reasonable Trustee Fee
The factors that go into determining a reasonable trustee fee are based in case law, specifically the 1958 Florida Supreme Court decision in West Coast Hospital Ass’n v. Florida National Bank of Jacksonville. The primary factors considered as a result of this decision are:
- The dollar amount of capital income received and disbursed by the trustee as part of their duties
- The customarily granted wages or salary for agents performing light work in the community
- The extent of a trustees success or failure in the performance of their duties
- Unusual skills, experience or other benefits the trustee brought to the administration of the trust
- How loyal the trustee was to the beneficiaries
- How much time was spent in administering the trust
- Customs in the community in question as to the level of compensation of trustees by courts and settlors, as well as that paid to trust companies and banks that are serving the role of trustee during the estate administration process
- The quality of work that the trustee performed
- Estimates the trustee provided as to the value of their services
- Any payments made to the trustee by the beneficiaries intended to be applied to the trustees overall compensation
There are other factors not listed here that may be included in the determination of appropriate and reasonable compensation for a trustee. Generally speaking, the basis behind all these factors is reasonableness, which is determined in light of the facts and circumstances of each estate administration case. Working with an attorney that specializes in estate administration is important to ensure that these factors are properly considered, as they are best equipped to present and argue the facts of a case.
Corporate Trustees
There are several situations that will require additional consideration in regards to trustee fees. For corporate or professional fiduciaries, there is a generally recognized range of fees that can be charged. Despite there being some variation in compensation as stated in the fee schedules of corporate trustees, this common recognized range is generally what is charged and upheld in courts.
Like what would be expected in the compensation of a non-corporate personal representative, corporate trustees are entitled to additional compensation for services rendered above and beyond what is considered normal. Corporate and professional fiduciary services are quite competitive in their rates, with trustee fees progressively lowering as the value of the trust assets increases.
Additional Considerations
In addition to the previously mentioned factors that go into determining trustee compensation, there are several other considerations to take into account. Namely, these include what should be considered to be reasonable compensation when there are multiple trustees involved, and also how the determination is made in regards to the allocation of a trustee’s fees from principal versus income.
In situations involving multiple trustees, the question often arises as to whether or not the overall amount that these trustees are paid should be higher than the amount paid to a single trustee performing the same amount of work. In Florida, the answer to this question is usually “no” unless there are provisions in the trust indicating otherwise, a separate agreement with a settlor that provides for higher compensation, or a trustee providing a special service that warrants increased fees.
The fees paid to multiple trustees are generally agreed upon by the trustees themselves, whether they are split evenly or otherwise. If this cannot be agreed upon by the trustees, the court processing the trust administration will determine it for them. Several key factors are taken into account when determining how fees will be divided among multiple trustees, which include:
- Whether or not the overall fee should be taken from the principal or income of the trust
- Whether certain beneficiaries should pay more than others
- If there is no specific language in the trust controls indicating whether the trust should pay from the principal or interest, then Florida Statutes §738.701 and §738.702 govern. These statutes indicate that one-half the ordinary compensation should be paid out of the trust income with the remainder coming from the principal.
Even though the Florida Legislature has failed to provide clear and uniform guidelines for determining the reasonableness of trustee fees, it is abundantly clear through case law that a trustee is entitled to compensation consistent with the services rendered during the administration of the trust. As mentioned previously, an attorney specializing in trust administration and probate proceedings can be immensely helpful in sorting out any misunderstandings and disputes.