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Trustee Compensation

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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Trustee Compensation

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  1. Trustee Compensation

  2. 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.

  3. Modern Law Assuming trust instrument is silent: • 1. Court Determination • Trustee petitions court for compensation approval.

  4. Modern Law • 2. Trustee Determination • Trustee determines reasonable compensation. • Trustee takes from trust. • Interested person can sue trustee for taking excessive compensation.

  5. Modern Law • 3. Schedule or Scale • Based on, for example, • Value of trust • Amount of trust income

  6. 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

  7. Compensation Issues • Should settlor waive compensation? • Should settlor provided a fixed fee? • Should settlor “shop around” for fees if using corporate trustee?

  8. Factors to Determine Reasonable Fee • 1. Gross income of trust

  9. Factors to Determine Reasonable Fee • 2. Success or failure of trust administration

  10. Factors to Determine Reasonable Fee • 3. Trustee’s skill and experience

  11. Factors to Determine Reasonable Fee • 4. Trustee’s fidelity or disloyalty

  12. Factors to Determine Reasonable Fee • 5. Amount of trustee’s liability exposure and responsibilities assumed

  13. Factors to Determine Reasonable Fee • 6. Time spent

  14. Factors to Determine Reasonable Fee • 7. Custom in the community

  15. Factors to Determine Reasonable Fee • 8. Character of work • Skill and judgment, or • Routine

  16. Factors to Determine Reasonable Fee • 9. Trustee’s estimate of value of services

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