A trust is a legal arrangement in which the trust maker (also referred to as the “trustor” or “settlor”) transfers the nominal ownership of assets to a trustee (fiduciary) for the benefit of selected individuals (beneficiaries).
What is a reasonable trustee fee in Florida? Read on to find out.
Compensation of Trustee in Florida – The Basics
Florida Statutes §736.0708 (1) establish that “if the terms of a trust do not specify the trustee’s compensation, a trustee is entitled to compensation that is reasonable under the circumstances.”
Florida Statutes §736.0708 (2) adds that “if the terms of a trust specify the trustee’s compensation, the trustee is entitled to be compensated as specified, but the court may allow more or less compensation if:
- The duties of the trustee are substantially different from those contemplated when the trust was created, or
- The compensation specified by the terms of the trust would be unreasonably low or high”
If the trustee was responsible for any additional services involved in the arrangement’s administration, he or she is allowed to receive further compensation in addition to the trustee’s reasonable compensation.
Compensation of Trustee in Florida – Taking a Closer Look
The first step to determine a trustee’s compensation is to look at the language used in the trust instrument. The trust instrument is the legal document that creates the trust and provides all details regarding the arrangement.
If the trust instrument has no language specifying the trustee’s compensation, Florida law states that the trustee is entitled to “reasonable compensation.” However, the statutes do not provide a specific threshold to define which percentages are deemed “reasonable.”
Under Florida case law, calculating trustee fees in Florida involves several factors, including:
- The standard amount of compensation given to fiduciaries performing similar work in the community
- The level of skill and judgment required in the trust administration
- Whether administering the trust requires a trustee with unusual skills or experience
- The risk and liability assumed by the trustee
- The amount of time required to administer the trust
- The standard amount of allowances paid to trustees by trustors or courts
- The standard amount of charges paid to trust companies and entities serving as trustees
- An estimated amount provided by the trustee as compensation for his or her services
What is a Reasonable Trustee Fee in Florida? – The Verdict
Calculating a reasonable trustee fee in Florida is not as simple as it may sound. Taking a closer look at case law, it is possible to find cases in which courts determined that the “lodestar” method is not appropriate to calculate trustee’s fees.
The “lodestar” method is often used to calculate attorneys’ fees by multiplying the number of hours reasonably applied to solve a case by a reasonable hourly rate. The best approach is to consult with an expert attorney for an individual assessment.
In most cases, the average amount of fees paid to a trustee in Florida range from 1% to 3% of the value of the trust. The larger and more complex a trust is, the higher the compensation fees are.