Under California law, trustee compensation must be “reasonable” if there are no criteria or other guidelines set forth in the trust. (Probate Code section 15681.)

Often, trusts simply say that the trustee is entitled to “reasonable compensation” without any definition or any guidelines  to help determine the amount of trustee compensation. In those cases, California law provides for the following guidelines to consider when determining or approving trustee compensation (California Rule of Court 7.776):

1. The gross income of the trust.
2. The success or failure of the trustee’s administration.
3. Whether the trustee possessed unusual skill, expertise, or experience.
4. The amount of time spent by the trustee in performance of trustee duties.
5. The custom and practice in the community.
6. The charges of corporate trustees for trusts of similar size and complexity.

Applying these legal guidelines to each case requires application of the fact and circumstances of each case, as well as case law and the practices of the local courts. Strategy is often involved in asserting or opposing trustee compensation claims.

In contrast, a living trust can be drafted to specify the amount of trustee compensation and define the amount in different ways.

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