Compensation and Fee Disputes
FIDUCIARY AND ATTORNEY COMPENSATION
Personal Representatives, Trustees, their attorneys and other professionals involved in the administration of probate and trust estates are entitled to reasonable compensation for their services.
Florida Statute 733.612, titled, ”Transactions authorized for the personal representative” sets forth the transactions, with some exceptions, a personal representative is authorized to employ in administering a Florida probate estate, unless otherwise prohibited by the Will or Court orders. Included is the personal representative’s authority to employ persons, including, but not limited to, attorneys, accountants, auditors, appraisers, investment advisers, and others, even if they are one and the same as the personal representative or are associated with the personal representative, to advise or assist the personal representative in the performance of administrative duties; act upon the recommendations of those employed persons without independent investigation; and, instead of acting personally, employ one or more agents to perform any act of administration, whether or not discretionary.
Florida Statutes 733.617, titled “Compensation of personal representative” and Florida Statute 733.6171, titled “Compensation of attorney for the personal representative”, set forth amounts presumed reasonable and factors for court’s to consider when determining whether compensation paid to the personal representative and his attorney are reasonable. Both statutes provide specific amounts, based on the compensable value of the estate and its income. These amounts are generally presumed reasonable for ordinary services.
In addition to receiving fees for ordinary services, personal representatives and their attorneys are entitled to further reasonable compensation for any extraordinary services provided during the administration. What is an extraordinary service may vary depending on many factors, including the size of the estate. It may also include other services as covered more fully in Florida Statute 733.617, including, but not limited to:
- Involvement in a will contest, will construction, a proceeding for determination of beneficiaries, a contested claim, elective share proceeding, apportionment of estate taxes, or any adversarial proceeding or litigation by or against the estate.
- Representation of the personal representative in audit or any proceeding for adjustment, determination, or collection of any taxes as well as providing tax advice or services of any kind
- Purchase, sale, lease, or encumbrance of real property by the personal representative or involvement in zoning, land use, environmental, or other similar matters.
- Legal advice regarding homestead status of real property or proceedings involving that status and services related to protected homestead.
- Involvement in fiduciary, employee, or attorney compensation disputes.
Upon the petition of any interested person, the Court may examine the compensation paid and determine it’s reasonableness. If determined unreasonable, the Court can increase or decrease the amount of compensation to be paid, as well as require the return of any monies paid that were determined unreasonable.
Florida’s Trust Code, also provides that a Trustee, like a personal representative, is entitled to compensation that is “reasonable under the circumstances.” See Florida Statute §736.0708(1).
Unfortunately, the statutes dealing with compensation in trust administrations are devoid of any reference to what amounts to “reasonable” compensation or how to determine whether fees sought by a trustee are per se reasonable. Generally, compensation of a Trustee may be established in the Trust instrument or by separate agreement with the Trustee. In the absence of either, the circuit court has jurisdiction to review and determine a trustee’s fees. F.S. §736.0201(4)(c), (4)(g).
Even in certain situations in which the trust does specify the trustee’s compensation, the court may adjust that compensation if the trustee’s duties are substantially different from those contemplated when the trust was created or if the compensation specified is unreasonably low or high. As a result, whether or not the trust instrument provides for the basis, amount, and form of compensation, the amount or rate of a trustee’s compensation or commission is not determined by any inflexible rule, but rests within the sole discretion of the appropriate court in which discretion is to be recognized in accordance with certain established principles as set forth in prior case law. As a result of the lack of a statutory guideline for determining the reasonableness of trustee fees, the court is left with the task of determining the reasonableness of the trustee’s compensation and in doing so will often look to the duties and responsibilities of the trustee under the particular trust at issue. See, for example, Osius v. Miami Beach First Nat. Bank, 74 So.2d 779 (Fla. 1954).
In 1958, the Supreme Court in West Coast Hospital Ass’n v. Florida National Bank of Jacksonville, 100 So.2d 807 (Fla. 1958), established factors for the court to consider in determining a reasonable fee. Some of the factors used in determining the reasonableness of a fee include:
- The amount of capital income received and disbursed by the trustee
- The wages or salary customarily granted to agents for performing light work in the community
- The success or failure of the trustee’s administration
- Any unusual skill or experience the trustee brought to the trust administration
- The loyalty or disloyalty of the trustee to the beneficiaries
- The amount of risk and responsibility assumed by the trustee
- The time involved in administering the trust
- The custom in the community as to compensation of trustees by settlors or courts and as to compensation paid trust companies and banks serving as trustees
- The character of the work performed by the trustee
- Any estimate the trustee has given of the value of his or her own services
- Payments made or allowed by the beneficiaries to the trustee intended to be applied toward the trustee’s compensation
The factors listed above are not all inclusive and the court may use other factors in determining the amount of reasonable compensation due a trustee. The fundamental criteria is reasonableness, determined in the light of the facts and circumstances of each individual case.
Despite Florida having no statutory schedule for trustee’s fees, a standard range of trustee’s fees is generally recognized by corporate or professional Florida fiduciaries. While there are numerous variations stated by corporate trustees in their fee schedules, there is a common range. Similar to the fixing of the compensation for a personal representative, the trustee is also entitled to additional compensation for extraordinary services. There is a significant amount of competition currently existing in the fees for services charged by trust departments, and rates generally decrease as the value of the trust assets increase.
Additional issues complicating the decision on the reasonable compensation of trustees also arise when there are multiple trustees, and in determining the allocation of a trustee’s fee from principal versus income. Should multiple trustees receive a greater amount in total of fees then a single trustee would receive for having done the same job? The answer appears to be “no” unless the trust provides otherwise, there is a separate agreement with the settlor providing otherwise, or a trustee is providing a special service that warrants an additional fee. See Westcoast Hospital Association v. Florida National Bank of Jacksonville, 100 So.2d 807 (Fla. 1958). Generally, the multiple trustees must agree on how the fee will be divided among them, otherwise the court will do so. With regard to the allocation of a trustee’s fee, the first question involves whether the fee should be taken from principal or income. The second issue becomes whether a particular beneficiary should pay more than other beneficiaries. With regard to the principal and income question the trust controls and absent language in the trust addressing this issue then Florida Statute §738.701 and §738.702 govern. Based upon these statutes, one-half of the ordinary compensation is to be paid out of trust income, the other from principal.
Despite the Florida Legislature’s failure to provide uniform measures for the reasonableness of trustee fees, it is clear that a trustee is entitled to reasonable compensation for his or her services rendered in administering the trust. Despite the absence of a statutory fee schedule, certain factors are applicable despite factual differences in each case. First and foremost, in seeking compensation for their services, the controlling duty of a trustee is the faithful and efficient conservation of the trust assets. It is also clear that in seeking compensation for their services, the burden of proof is on the trustee to show that money expended was a proper disbursement and reasonable. If the trustee fails to keep clear, distinct and accurate accounts, all presumptions are against him and all insecurities and doubts are to be taken adversely to him. If he loses his accounts, he must bear any resulting damage. See Troub v. Troub, 135 So.2d 243 (Fla. 2nd DCA 1961). Therefore, any compensation to be paid to a trustee must be contained within trust accountings, unless waived by all interested parties.
As there is generally no day to day oversight by the Court as to compensation being paid, Beneficiaries must be conscious of the amount of compensation a trustee is receiving. The only certainty about the reasonableness of such compensation is that there is no certainty and it is the trustee’s responsibility to account for his or her time and services, and the amount of compensation they are paid must be in line with the services they have provided.
If you have any questions about the amount of compensation you can receive as a fiduciary or attorney for a fiduciary or regarding the amounts being paid to the trustee, personal representatives and their attorneys from a trust in which you are a beneficiary, please contact a trust litigation attorney at the Law Offices of Christopher P. Taylor, PA, or submit your questions regarding compensation and fees to Mr. Taylor online.