Readers of the blog here in California know that setting up a trust can be an excellent way to preserve and utilize money for a specific purpose, or a specific person. Many estate plans include at least one trust, and they are favored because of the peace of mind and stability they can provide. However, one integral person in the trust can often be overlooked: the trustee.
The trustee is the central person in charge of making sure the rules of the trust are followed, and without an experienced, qualified and dedicated trustee, even the most carefully designed trusts can fall into disarray. Trust administration can be a thankless job, but it should not necessarily be an uncompensated job.
Upon formation of the trust, the trustee is usually named and the trustee’s compensation is set. If the trust fails to provide for a trustee compensation clause, the court generally interprets this to allow for ‘reasonable compensation’ of the trustee. However, when the trust specifically forbids trustee compensation, the trustee should not expect the court to overlook that provision, and therefore should not expect to get paid.
Of course not all trustees expect to get paid for their services. Sometimes a family or business associate oversees the trust for personal or other reasons free of charge. People who are concerned who to pick as trustee have a lot of factors to weigh, but getting one at a bargain price or for free shouldn’t be the most important qualification in most circumstances. A trustee should have the experience, professional reputation, time and ability to oversee the trust to the extent necessary to ensure its proper administration.
Source: Lake County News, “Estate Planning: Trustee compensation – when and how,” Dennis Fordham, March 16, 2013