Being a trustee isn’t just signing a few papers—it’s a real job that takes serious time, know-how, and attention to detail. California law says trustees should get paid for their work, but figuring out what’s 'fair' isn’t always straightforward. Even with state guidelines, you’ll often see beneficiaries pushing back on fees, co-trustees disagreeing over pay, or even judges stepping in to settle compensation fights.
At Kavesh, Minor & Otis, our California trust attorneys regularly assist trustees and beneficiaries in understanding fee structures, resolving conflicts, and ensuring compliance with legal standards. Below, we break down how trustee compensation is calculated, when fees may be challenged, and how courts evaluate reasonableness.
How Trustee Compensation Is Determined in California
California law recognizes that trustees deserve fair payment for their work, but the amount must align with the duties performed and the estate’s complexity. Compensation can be structured in several ways, and understanding these methods is crucial for both trustees and beneficiaries to avoid disputes.
1. Compensation Outlined in the Trust Document
Many trusts specify the trustee’s payment terms, such as a fixed fee, hourly rate, or percentage of the trust’s assets. If the document includes clear instructions, those terms generally govern—unless a court finds them unreasonable or conflicts arise.
Even when a trust lays out compensation terms upfront, those numbers can become a problem years later. Think about it—a trust set up in the 1990s might lock in a $5,000 annual fee that made sense then but now barely covers a fraction of the work required, especially if the trust’s assets have ballooned. When that happens, trustees aren’t stuck; they can go to court and make the case that the old terms don’t fairly pay for today’s responsibilities.
Additionally, family members serving as trustees sometimes waive fees, but professional trustees (such as banks or attorneys) nearly always charge for their services. If a trust names a corporate trustee but does not specify compensation, the institution’s standard fee schedule will typically apply, which may be higher than statutory rates.
2. Statutory Fees Under California Probate Code §15681
If the trust is silent on compensation, trustees are typically paid according to statutory guidelines. For ordinary services, fees are calculated as follows:
Annual fees:
- 1% of the trust’s *market value* for the first $1 million
- 0.5% of the next $1 million
- 0.25% of amounts exceeding $2 million
Termination fees:
- 1% of distributions made when the trust ends
While these percentages give a starting point, judges often tweak them depending on what the job actually involves. A trustee juggling a family business or a portfolio of rental properties will likely earn more than someone just overseeing a basic investment account.
And remember—those standard rates only cover routine work. If you’re dealing with messy stuff like selling off assets, fighting the IRS, or going to court over the trust, you can (and should) ask to be paid extra for the hassle
3. Additional Fees for Extraordinary Services
Trustees may request extra compensation for tasks beyond routine administration, such as:
- Litigation. Defending the trust against lawsuits or resolving disputes among beneficiaries can be time-consuming and may warrant additional pay.
- Business management. If the trust owns a business, the trustee may need to oversee operations, negotiate sales, or handle complex financial reporting.
- Tax filings. Preparing estate tax returns, responding to IRS audits, or dealing with multi-state tax issues often requires specialized knowledge.
Here’s the catch: The court has to sign off on these extra fees—and you can bet beneficiaries will speak up if the numbers look too high. Smart trustees keep rock-solid records: think time logs, receipts, and clear explanations for every dollar asked. No shoeboxes full of random notes; this needs to stand up in court.
When Trustee Compensation May Be Disputed
While most trustees act in good faith, disagreements over fees are common. These disputes often arise when beneficiaries believe the trustee is overcharging or not fulfilling their duties properly.
Common Reasons for Fee Disputes
- Fees exceeding statutory limits. If a trustee charges above California’s default rates without clear justification, beneficiaries may challenge the payments. For example, a trustee who takes 2% annually on a $3 million trust without performing extra services could face objections.
- Poor performance. A trustee who neglects duties—such as failing to invest assets prudently, delaying distributions, or mismanaging property—may face fee reductions or even removal.
- Self-dealing or conflicts of interest. Courts may deny compensation if a trustee profits unfairly, such as by hiring their own company for trust services at inflated rates.
How Courts Evaluate Reasonableness
When trustee compensation disputes land in court, judges don't just pull numbers out of thin air. They carefully weigh several key factors to determine what's fair. Here's what really matters:
- The trust's size and complexity. A simple trust with just a house and bank account won't justify the same fees as one managing multiple rental properties or a family business. Courts look at whether the trustee's workload actually matches what they're charging. That fancy Napa vineyard in the trust? That might warrant higher fees than grandma's savings account.
- The trustee's skill and experience. Your cousin serving as trustee probably shouldn't charge like a Wall Street pro. Courts consider whether the trustee is a professional (like a bank or attorney) or a family member, and adjust expectations accordingly. But here's the catch even pros need to show their fees line up with what others in the area charge for similar work.
- Time and labor required. Judges love paperwork (we know, shocking). Trustees who can show detailed records think time logs, emails about trust business, receipts for expenses have a much better shot at getting their fees approved. Vague entries like "trust stuff 5 hours" tend to get shot down faster than a bad reality TV show.
- Local norms and practices. What flies in San Francisco might raise eyebrows in Riverside. Courts often check what other trustees in the area charge for comparable trusts. They're not fans of trustees who try to charge Manhattan prices in Modesto.
- Results achieved. Did the trustee actually do a good job? Courts may reduce fees for trustees who dragged their feet, made poor investment choices, or generally bungled the job. On the flip side, trustees who increased the trust's value or handled complex issues smoothly might get more leeway.
Remember, courts can slash fees, order refunds, or even boot trustees who push their luck. The key is being able to show with real evidence that the fees match the work. No judge wants to hear "trust me" when it comes to trustee compensation.
How a California Trust Attorney Can Help
Let's be honest—trustee fee fights can get messy fast. That's where having a good trust attorney in your corner makes all the difference.
For trustees, we help you:
- Avoid rookie mistakes like poor record-keeping that could sink your compensation claim
- Build a solid case showing exactly why your fees are justified (with receipts, literally)
- Navigate those tricky situations where the trust document's fee terms don't match reality anymore
- Push back when beneficiaries complain just to be difficult (because yes, that happens)
For beneficiaries, we're your watchdog:
- Reviewing fee requests with a fine-tooth comb to spot red flags
- Calling out when trustees try to charge for "services" that were never actually performed
- Making sure family-member trustees aren't suddenly acting like high-priced professionals
- Stepping in when fees seem out of whack with what the trust actually required
Whether you're trying to get paid fairly or stop someone from draining the trust with ridiculous fees, having an experienced trust attorney means you won't be going it alone. We speak the court's language, know what judges look for, and most importantly we've seen all the creative ways these disputes can go sideways.
At the end of the day, reasonable trustee compensation should be just that reasonable. Not a windfall, not a punishment, but fair pay for real work. That's what California law requires, and that's what we help make happen.
