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RayAnswers, Attorney
Category: Estate Law
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Experience:  Texas lawyer for 30 years in Estate law
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What is "reasonable compensation" when a successor trustee

Customer Question

What is "reasonable compensation" when a successor trustee administers a trust. The original trustee died and a successor trustee was the attorney who drew the trust up. There is no listing of fees mentioned other than reasonable compensation. We are the beneficiaries and just received a full accounting of the assets which total approx. $180K gross. The attorney has provided an itemized billing for over $36,000. This estate was a simple estate with only the house being in the name of the trust. All the work i.e, clearing the home, furniture, was done by us the beneficiaries. We have already sent an email back to the attorney informing him that we were not accepting this as reasonable compensation to himself. The decedent only had approx. $3-4K in checking and his home was his asset. There was a reversible mortgage that was paid off of $77,000 leaving approx. $160,000. We have been given $100K already but were expecting another large sum of at least approx. $40K. We are now being told we would receive only $26K. He is taking over $36,000 which is totally unreasonable. The person died in Delaware. So should I check what the fees and compensation are for the total asset of $180K which is what he is stating and showing. He also has billed the estate at $300 and $305 per hour. He basically has taken 20% of $180K estate.
Submitted: 19 days ago.
Category: Estate Law
Expert:  RayAnswers replied 18 days ago.

Hi and welcome to JA. Ray here to help you today.Please bear with me a few moments while I review your question, conduct and prepare your response.

Expert:  RayAnswers replied 18 days ago.

Law for reference

3560 Trustees entitled to compensation in accordance with instrument.

(a) Trustees under wills, trustees under inter vivos deeds of trust, both revocable and irrevocable, and successors to such trustees, are entitled to reasonable compensation for their services in accordance with the instrument creating the trust. Subject to other provisions of this subsection, if a trust instrument fixes the reasonable compensation of a trustee, the trustee is entitled to compensation as so determined. Upon proper showing, the Court of Chancery may fix or allow greater or lesser compensation than could be allowed under the terms of such trust in any of the following circumstances:

(1) Where the duties of the trustee are substantially different from those contemplated when the trust was created;

(2) Where the compensation in accordance with the terms of the trust would be unreasonably low or high;

(3) In extraordinary circumstances calling for equitable relief.

(b) An order under this section allowing greater or lesser compensation applies to such actions taken in the administration of a trust as the order shall specify.

67 Del. Laws, c. 56, § 2.;

§ 3561 Reasonable compensation when trust instrument does not determine.

(a) As used in this section, the term "qualified trustee'' means any person authorized by the law of this State or of the United States to act as a trustee whose activities are subject to supervision by the Bank Commissioner of the State, the Federal Deposit Insurance Corporation or the Comptroller of the Currency of the United States.

(b) Unless a trust instrument specifically provides that the trustee shall serve without compensation, when a trust instrument does not fix the compensation of the trustee, reasonable compensation shall be allowed. Subject to the provisions of § 3562 of this title, such compensation shall be determined as follows:

(1) For qualified trustees:

a. Each qualified trustee shall file with the Register in Chancery for every county in this State, a copy of a schedule or formula by which its allowance as compensation shall be computed. Such schedule or formula may be based upon or reflect the following factors:

1. The time spent or likely to be spent in administering a trust of the type contemplated;

2. The risks and responsibilities involved;

3. The novelty and difficulty of the tasks required of the trustee;

4. The skill and experience of the trustee;

5. Comparable charges for similar services;

6. The character of the trust assets;

7. The time constraints imposed upon the trustee in administering the trust;

b. Each qualified trustee shall provide a copy of its current trustee fee schedule or formula as filed upon any filing pursuant to paragraph (b)(1)a. of this section to the settlor of any revocable trust and to each current income beneficiary of every other trust from which it will seek to be allowed compensation to be calculated in accordance with such schedule or formula;

c. Each qualified trustee shall be allowed as reasonable compensation for services with respect to each trust from which it is entitled to compensation under this section, an amount determined by application of the schedule or formula so filed to trusts of that size and type.

(2) For other trustees, the Court of Chancery shall from time to time promulgate a rule fixing the method by which trustees other than qualified trustees may be allowed compensation for their services.

(3) There shall be no presumption that a fee schedule filed under paragraph (b)(1) of this section is any more or less reasonable than the schedule promulgated under paragraph (b)(2) of this section.

67 Del. Laws, c. 56, § 2.;

§ 3562 Judicial review of trustees' allowances.

(a) The provisions of § 3561(b)(1)c. of this title notwithstanding, the settlor or any current income beneficiary of a trust, or any other person having an equitable interest in a trust from which a fee for trustee compensation is taken or is proposed to be taken pursuant to § 3561(b) of this title, who objects to a schedule or formula filed thereunder as being unreasonable, or who objects to the fee fixed by such schedule or formula as being unreasonable in the particular circumstances, may petition the Court of Chancery for judicial review of the reasonableness of the schedule or formula, or of its application, as the case may be.

(b) Upon the filing of any such petition, the Court of Chancery may appoint a disinterested third person to act as master to hear and determine the matters raised by such petition and any answer thereto. Proceedings before such master shall be in conformance with the Rules of the Court of Chancery. The final report of the master shall be in the form of findings of fact, conclusions of law and recommended decree, and shall be filed with the Register in Chancery. Findings of fact made by the master, if supported by substantial evidence, shall be conclusive. The Court of Chancery shall thereafter enter its decree determining the matter in issue. Costs of the proceeding, including the reasonable fee of the master, shall be assessed against the trust in question if the petition is denied in its entirety and shall be assessed against the trustee in its individual capacity if it is granted in whole. In other instances, costs shall be apportioned equitable.

Expert:  RayAnswers replied 18 days ago.

You would have your most success here arguing a couple of points, First what is a reasonable hourly rate.You argue this is to high, if you win here that automatically reduces the bill .The second point here to to scrutinize the bill to see if anything is duplicitous or ridiculously extravagant, six hours to check files or something similar.Try to pick out specific things here you question.

This is the only case I can find it deals with lawyer fees but the analogy is reasonable for legal argument and what was reasonable.

http://www.delawarelitigation.com/2010/09/articles/chancery-court-updates/court-of-chancery-addresses-indemnification-of-attorneys-fees-in-context-of-contingent-fee-with-premium-arrangement/

Judge here would have final say.Hone your argument to lower the hourly fee-trust was simple with small assets. It was not complicated and di not require that high a level of expertise.Pick some specific billings that were large and iffy too.

I appreciate the chance to help you tonight.

If you can rate 5 stars it is much appreciated.

Thanks again and good luck here.

Expert:  RayAnswers replied 18 days ago.

Reasonable Compensation Defined (Perhaps)

It is well settled that factors to be considered when evaluating the reasonableness of a trustee fee include but are not limited to:

  • The value and character of the trust property and the risk and responsibility of administering the property;
  • The time spent and the quality and character of the services provided by the trustee;
  • The character and cost of services provided by others;
  • The trustee’s skill and experience; and
  • The results obtained (UTC §708 and comment).

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Expert:  RayAnswers replied 18 days ago.

These may help you to hone

your arguments.

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