A recent non-published case reaffirmed the rule that where the measure of trustee compensation is unambiguously set forth in the trust instrument that measure of compensation is controlling. It also highlights the necessity of obtaining court approval before fees requiring approval are incurred.
The trust document at issue contained the following provision: “The Trustees shall be entitled to reasonable compensation for their services. For this purpose, a fee equal to one percent (1%) of the value of the trust estate, per year, shall be considered reasonable. The Trustees may, at trust expense, seek court approval of their fee.”
The court applied the following rules for construing trust instruments:
- The duty of the court is to first ascertain and give effect to the intent of the maker;
- The intention of the testator as expressed in the instrument controls its legal effect;
- The intent must be ascertained from the whole of the trust instrument, not just separate parts of it;
- The language related to trustee compensation must be read together and harmonized with each provision helping to interpret the other.
Finding the trustee compensation provision unambiguous — the court held trustee compensation was limited to 1% of the value of the trust estate.
The trustees where not entitled to greater compensation because they had not sought and obtained court approval prior to taking the actions for which additional compensation was sought. The trustees failed to comply with Pobate Code section 15680(c) which provides: “An order fixing or allowing greater or lesser compensation . . . applies only prospectively to actions taken in administration of the trust after the order is made.” (Italics added.)
Mr. Daymude consults with trustors, trustees, and beneficiaries and accepts cases involving the interpretation of testamentary instruments and petitions and objections in probate, including those concerning a trustee’s fees. For other types of cases accepted, please scroll the Home and My Practice pages. If you are seeking a legal consultation or representation, call Michael Daymude at 818-971-9409.