Trustee Excessive Compensation Under California Law

In California, a trustee is paid what the trust document provides or, if it is silent, reasonable compensation under the circumstances. Fees become excessive when they go beyond what the work actually justified. A beneficiary can ask the court to review the fees, reduce or deny them, or remove the trustee.

Most people facing this question have just opened an accounting, or a letter announcing a higher fee, and found a number that does not sit right. Perhaps a sibling serving as trustee has been paying themselves from a parent's trust while a house sits unsold. Perhaps a corporate trustee's charges seem to grow each year while distributions shrink. The reader usually wants to know two things: what the law actually allows a trustee to take, and what can be done if the trustee took more than that. Trustees who have been accused of overcharging ask the same questions from the other side.

This page explains the California standard for trustee pay, what tends to make a fee excessive, the 60-day notice rule for fee increases, the information a beneficiary is entitled to, the remedies a court may order, and the time limit for bringing a claim. It is written for disputes. It does not cover how to set up a trust or how to run one when everyone agrees.

What California Law Says About Trustee Compensation

Probate Code section 15681 sets the default rule in a single sentence: "If the trust instrument does not specify the trustee's compensation, the trustee is entitled to reasonable compensation under the circumstances." The trust instrument is the written trust document and any valid amendments. When that document is silent about pay, reasonableness is the test.

Reasonable compensation, in plain words, means pay that fits the nature, complexity and demands of the work the trustee actually performed. It is not a reward for holding the title, and it is not a share of the estate. No California statute sets a fixed percentage, a fixed hourly rate or a schedule of trustee fees. The answer depends on the facts of each trust.

When the trust document does set the pay, Probate Code section 15680(a) says the trustee is generally entitled to be paid as the document provides. That provision is not the end of the matter. Under section 15680(b), the court may, on a proper showing, allow greater or lesser compensation than the document allows where the trustee's duties are substantially different from what was contemplated when the trust was created, where pay under the document's terms would be inequitable or unreasonably low or high, or in extraordinary circumstances calling for equitable relief. Any such order applies only going forward, to actions taken after the order is made (section 15680(c)). Under Probate Code section 15682, the court may also fix an amount of periodic compensation to continue for as long as the court determines is proper.

The reasonableness standard does not change with the type of trustee. A bank or professional trust company and a son or daughter serving as successor trustee are both held to "reasonable compensation under the circumstances" when the document does not fix their pay. A professional may bring more skill and charge more for it. A family member may do less and be entitled to less. Neither is exempt from the question of whether the fee matches the work.

Factors Courts Consider When Evaluating Trustee Fees

The Probate Code does not list factors for deciding what is reasonable. The statute says "under the circumstances" and leaves the circumstances to the evidence. In practice, a fee dispute in the Superior Court tends to turn on a familiar set of questions about the trust and the trustee's work.

The nature and complexity of the assets and the tasks. A trust holding one brokerage account asks less of a trustee than a trust holding rental properties, a family business, or property in several counties that needs repair, leasing or sale. Tax filings, litigation with third parties, and difficult beneficiaries can all add real work.

The time actually spent. Records matter here. A trustee who kept time entries, emails and a log of trust tasks can show what was done. A trustee who kept nothing may have a harder time defending a large fee.

The skill and experience the work required. Some trusts call for investment judgment, real estate knowledge or business management. Others call for paying bills and filing papers. The skill the job demanded, rather than the skill the trustee happens to have, tends to frame this question.

Fidelity and loyalty. A trustee who favored themselves, delayed distributions without reason, or ignored beneficiaries' requests is in a weaker position to claim full pay than one who administered the trust faithfully.

Results achieved. Whether the trustee preserved and grew the trust, sold property sensibly, and moved the administration forward bears on whether the fee was earned.

Fees customarily charged for comparable services. What professional trustees generally charge for similar work in the community can serve as a reference point, though it does not set a ceiling or a floor.

Two cautions apply. First, the size of the trust is one consideration, not the whole answer. A large estate does not by itself justify a large fee if the administration was simple. Second, the evidence that tends to carry weight is what the trustee actually did, not what the trustee says was done. No single consideration decides the question; the court looks at the whole picture of the administration.

When Trustee Compensation Becomes Excessive Under California Law

Excessive compensation is the reasonableness standard viewed from the other direction: pay is excessive when it exceeds what is reasonable under the circumstances, or exceeds what the trust document allows. California law treats the issue seriously. Under Probate Code section 15642(b), the grounds on which a court may remove a trustee include "where the trustee's compensation is excessive under the circumstances." That list is partial; it also includes breach of trust, insolvency or unfitness, hostility or lack of cooperation among cotrustees that impairs administration, and failing or declining to act, among others.

Charging too much can also be a breach of trust, meaning a violation of a duty the trustee owes to the beneficiaries. When that is so, Probate Code section 16420(a)(7) allows a beneficiary or cotrustee to bring a proceeding "to reduce or deny compensation of the trustee." The full set of remedies in that section is discussed further below.

Certain patterns come up repeatedly in fee disputes:

• Double-dipping. A trustee charges a trustee fee and also charges, or pays an affiliate, a separate management or investment fee for the same work. Paying twice for one service can make the total excessive.
• Charging for delegated work. A trustee hires a property manager, accountant or attorney, pays them from the trust, and then bills the trust again at the trustee's rate for the same tasks.
• Unexplained lump sums. Payments to the trustee appear in bank records with no matching description of work.
• Paying for personal benefit. Trust funds cover the trustee's own expenses, travel or use of trust property.

The last pattern connects to a separate duty. Probate Code section 16004(a) provides that "the trustee has a duty not to use or deal with trust property for the trustee's own profit or for any other purpose unconnected with the trust, nor to take part in any transaction in which the trustee has an interest adverse to the beneficiary." Self-dealing, meaning a trustee acting on both sides of a transaction for their own benefit, falls under this duty even when it is dressed up as compensation.

Section 16004(c) adds a presumption. A transaction between the trustee and a beneficiary, during the trust or while the trustee's influence over the beneficiary remains, by which the trustee obtains an advantage, is presumed to violate the trustee's fiduciary duties; this presumption shifts the burden of proof to the trustee, but it does not apply to the provisions of an agreement between a trustee and a beneficiary relating to the hiring or compensation of the trustee. So a signed fee agreement is not presumed improper under that subdivision, while a side deal that benefits the trustee may be.

None of this is automatic. A court asked to reduce, deny or claw back compensation weighs all of the circumstances, and a fee that looks high on paper may turn out to match the work once the records are examined.

The 60-Day Notice Requirement for Fee Increases

Probate Code section 15686(b) sets a plain rule: "A trustee shall not charge an increased trustee's fee for administration of a particular trust unless the trustee first gives at least 60 days' written notice of that increased fee" to the people the section names. "Trustee's fee" includes, but is not limited to, the trustee's periodic base fee, rate of percentage compensation, minimum fee, hourly rate and transaction charge, but not fees for extraordinary services (section 15686(a)).

The notice must go to all of the following:

1. Each beneficiary who is entitled to an account under Probate Code section 16062.
2. Each beneficiary who was given the last preceding account.
3. Each beneficiary who has made a written request to the trustee for notice of an increased trustee's fee and has given an address for receiving notice.

Section 15686(c) gives beneficiaries a way to pause the increase. If a beneficiary files a petition under Probate Code section 17200 for review of the increased fee or for removal of the trustee, and serves a copy on the trustee before the 60-day period expires, the increased fee does not take effect as to that trust until the court orders otherwise or the petition is dismissed.

The practical effect is a defined window. A beneficiary who receives a fee-increase notice has the period before the 60 days run out in which a filed and served petition holds the old fee in place while the court looks at the new one. After that period, the increase can take effect, though the beneficiary may still be able to challenge the fee's reasonableness in other proceedings. More detail on how these petitions work appears in this site's explainer on the Probate Code 17200 petition.

A Beneficiary's Right to Information and Accountings

Excessive fees usually come to light on paper, and California gives beneficiaries several ways to get that paper. Under Probate Code section 16060, "The trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration." Under section 16061, except as section 16069 provides, the trustee must, on a beneficiary's reasonable request, provide requested information about the trust's administration that is relevant to that beneficiary's interest.

The formal accounting is the more powerful tool. An accounting is a written report of what the trust held, what came in, what went out, and to whom. Under Probate Code section 16062(a), except as that section and section 16064 provide, the trustee must account at least annually, at the termination of the trust, and upon a change of trustee, to each beneficiary to whom income or principal is required or authorized in the trustee's discretion to be currently distributed. That duty does not run to every beneficiary. A remainder beneficiary who receives nothing until a later event may not be owed an annual account under that section, although the right to information under section 16061 still applies. Section 16062 also excludes certain older trusts, including living trusts created by instruments executed before July 1, 1987.

A waiver does not always close the door. Under section 16064, a trust document may waive the account and a beneficiary may waive it in writing, but in either case the court may compel the trustee to account "upon a showing that it is reasonably likely that a material breach of the trust has occurred." A beneficiary's written waiver may also be withdrawn in writing for transactions after the withdrawal. And under section 16062(e), a waiver in the trust document is void as to certain sole trustees described in that subdivision.

When a request goes unanswered, Probate Code section 17200(b)(7) allows a petition asking the court to compel the trustee to:

• provide a copy of the terms of the trust;
• provide information under section 16061, if the trustee has failed to provide it within 60 days after the beneficiary's reasonable written request and the beneficiary has not received the requested information within the six months preceding the request; or
• account to the beneficiary, subject to section 16064, if the trustee has failed to submit a requested account within 60 days after the beneficiary's written request and no account has been made within the six months preceding the request.

The accounting is where compensation shows up. Payments to the trustee should appear as disbursements, and a careful reading often shows whether fees were taken monthly, in lump sums, or in addition to payments to the trustee's own companies. Beneficiaries who have been told "everything is fine" without seeing numbers often find that this stage is where the real conversation begins.

Remedies Available When Trustee Fees Are Excessive

Probate Code section 16420(a) states what a beneficiary or cotrustee may ask for when a trustee commits, or threatens to commit, a breach of trust. A proceeding may be brought for any of these purposes that is appropriate:

1. To compel the trustee to perform the trustee's duties.
2. To enjoin the trustee from committing a breach of trust.
3. To compel the trustee to redress a breach of trust by payment of money or otherwise.
4. To appoint a receiver or temporary trustee to take possession of the trust property and administer the trust.
5. To remove the trustee.
6. Subject to section 18100, to set aside acts of the trustee.
7. To reduce or deny compensation of the trustee.
8. Subject to section 18100, to impose an equitable lien or a constructive trust on trust property.
9. Subject to section 18100, to trace trust property that has been wrongfully disposed of and recover the property or its proceeds.

Section 16420(b) adds that these remedies do not prevent resort to any other appropriate remedy provided by statute or the common law. A constructive trust, mentioned in item 8, is a court order treating specific property as held for the rightful owner.

The usual vehicle is a petition under Probate Code section 17200(a), which allows a trustee or beneficiary, except as section 15800 provides, to petition the court concerning the internal affairs of a trust. The proceedings section 17200(b) lists are not exhaustive; they include settling accounts and passing on the trustee's acts, fixing or reviewing the reasonableness of the trustee's compensation, and appointing or removing a trustee. Under section 17206, the court "in its discretion may make any orders and take any other action necessary or proper to dispose of the matters presented by the petition, including appointment of a temporary trustee to administer the trust in whole or in part."

Removal follows its own rule. Under Probate Code section 15642(a), a trustee may be removed in accordance with the trust instrument, by the court on its own motion, or on petition of a settlor, cotrustee or beneficiary under section 17200. Excessive compensation is one of the grounds in section 15642(b) described earlier. A court is not required to remove a trustee because a fee was too high; it weighs the circumstances, and a reduced fee may be the whole result.

Surcharge is the term for a court order making a trustee pay the trust for losses caused by a breach. Under Probate Code section 16440(a), a trustee who commits a breach of trust is chargeable with whichever of the following is appropriate: any loss or depreciation in value of the trust estate resulting from the breach, with interest; any profit made by the trustee through the breach, with interest; or any profit that would have accrued to the trust estate if the loss of profit resulted from the breach. Section 16440(b) gives the court discretion to excuse a trustee, in whole or in part, who "acted reasonably and in good faith under the circumstances as known to the trustee" if it would be equitable to do so. A surcharge is therefore never certain in advance.

Probate Code section 859 reaches more serious conduct. If a court finds that a person has in bad faith wrongfully taken, concealed or disposed of property belonging to a trust or a decedent's estate (among others), or took, concealed or disposed of it by undue influence in bad faith or through elder or dependent adult financial abuse, that person is liable for twice the value of the property recovered by an action under that part of the Probate Code. The person may also, in the court's discretion and except as otherwise required by law, be liable for reasonable attorney's fees and costs. Neither the doubled amount nor fees follow from an ordinary fee disagreement; each depends on the court making the finding the section requires.

These petitions are heard by the Superior Court of California for the county where the trust is administered, usually in its probate division. A broader overview of these proceedings appears in this site's guide to California trust litigation. Fee disputes sometimes arise alongside a challenge to the trust document itself, which is a different proceeding covered in the explainer on how to bring a trust contest.

The Statute of Limitations for Excessive-Fee Claims

Probate Code section 16460(a) sets the time limit for a breach-of-trust claim, and it has two branches. Which branch applies depends on what the beneficiary received.

First branch: an account or report that discloses the claim. If a beneficiary has received an interim or final account in writing, or another written report, that adequately discloses the existence of a claim against the trustee, the claim is barred as to that beneficiary unless a proceeding is commenced within three years after receipt of the account or report. An account or report adequately discloses a claim "if it provides sufficient information so that the beneficiary knows of the claim or reasonably should have inquired into the existence of the claim."

Second branch: no adequate disclosure, or nothing received. If the account or report does not adequately disclose the claim, or the beneficiary did not receive any written account or report, the claim is barred unless a proceeding is commenced within three years after the beneficiary discovered, or reasonably should have discovered, the subject of the claim.

Both branches assume the claim was not already barred by an earlier court ruling, consent or another limitation. Section 16460(b) also explains when a beneficiary is treated as having received an account; for an adult reasonably capable of understanding it, that is when the adult personally receives it, and different rules apply to minors and to adults who cannot understand the account.

The practical point is that the first branch can begin running when an account arrives, whether or not anyone read it closely. An accounting that lists trustee fees clearly may be enough to start the three-year period for a claim that those fees were too high. For a beneficiary who has a stack of unopened accountings, this is often the most important fact on the page.

If You'd Like to Talk Through a Fee Dispute

A trustee-fee question usually comes down to records: the trust document and any amendments, every accounting or written report received and the date it arrived, any fee-increase notice, and the bank statements showing what the trustee actually paid themselves. An attorney looking at a dispute like this would typically want those documents, along with a timeline of what the trustee did and when beneficiaries asked for information, because those dates decide which deadline and which remedy may apply. For readers whose question is about setting up a trust or about tax treatment of trustee fees, this site is not written for that, and a different resource will be more useful.

To discuss a disagreement over trustee compensation with an attorney, you can request a consultation about your dispute through California Trust Litigation Lawyers.