TL;DR — Key Takeaways

• California trustees are entitled to reasonable compensation under Probate Code § 15681 unless the trust says otherwise.
• There is no statutory percentage like California’s probate fee schedule. “Reasonable” is fact-specific and depends on the work.
• Professional trustees and corporate trustees typically charge 1% to 1.5% of trust assets annually. Family trustees often charge an hourly rate or a smaller percentage, or waive fees entirely.
• Family trustees can charge fees, and often should — administering a trust is real work. Waiving fees can also create gift tax issues in larger estates.
• Beneficiaries can dispute trustee fees, and courts will reduce fees that aren’t reasonable for the work performed.

Are Trustees Legally Entitled to Compensation in California?

Yes. California Probate Code § 15681 provides that a trustee is entitled to reasonable compensation if the trust does not specify the trustee’s compensation. If the trust does specify compensation — a flat fee, an hourly rate, a percentage, or a waiver — those terms generally control. [VERIFY: confirm current Probate Code § 15681 language.]

The right to compensation kicks in whether the trustee is a professional, a corporate fiduciary, a family member, or a friend. Anyone serving as trustee is doing real work and the law recognizes that.

Compensation is paid out of the trust’s assets, not by beneficiaries personally. It comes out of trust income or principal depending on the trust’s terms and California’s principal-and-income allocation rules.

How Is Trustee Pay Calculated in California?

California does not have a statutory trustee fee schedule. “Reasonable compensation” under § 15681 is determined case-by-case, based on factors courts have laid out over years of decisions.

The factors generally include: the time the trustee spends, the size and complexity of the trust, the skill and experience required, the nature of the assets (real estate, business interests, and unique assets require more work than a brokerage account), the results achieved, and the customary rates for similar services.

Common compensation models: a percentage of trust assets (often 0.5% to 1.5% annually), an hourly rate (typical professional rates run $200 to $500 per hour, family trustees might charge $50 to $150), or a flat annual fee. Some trustees combine models — an annual base plus an hourly rate for unusual work.

What Is Considered Reasonable Trustee Compensation?

Corporate trustees and professional fiduciaries typically charge 1% to 1.5% of trust assets per year for ongoing administration of a routine trust. Larger trusts often see lower percentages on a sliding scale — for example, 1% on the first $5 million and 0.5% on amounts above. Setup or termination work is usually billed separately.

For trust administration after a death (winding up the trust and distributing assets), a one-time fee equal to roughly 1% of the trust’s value is common, though this varies with complexity. Estates with real estate, business interests, or contested issues run higher.

Family trustees who take an active role often charge $40 to $100 per hour for their time, or a flat fee proportional to the work. The number isn’t the point — the documentation is. Whatever the trustee charges, it should be supported by detailed time records and explained to beneficiaries.

Can a Family Member Trustee Charge Fees?

Yes. Nothing in California law prevents a family member from receiving trustee compensation, and nothing requires them to. The trust document controls.

Many family trustees feel awkward charging. They shouldn’t. Administering a trust involves real work: gathering assets, paying bills, filing tax returns, communicating with beneficiaries, making distribution decisions, keeping records, and handling disputes. A child administering a parent’s $2 million trust may spend 100 to 200 hours on it in the first year. That’s not free.

There’s also a tax wrinkle. If a family trustee waives fees they could have charged, the IRS sometimes treats the waiver as an indirect gift to the other beneficiaries. For most modest estates that doesn’t matter. For larger estates approaching the federal estate tax exemption, it can.

If you do charge, document everything. Time records, descriptions of work performed, and an annual accounting that includes your fee build the foundation for defending the compensation if a beneficiary later complains.

Can Beneficiaries Dispute Trustee Fees?

Yes. Beneficiaries who believe a trustee’s fees are unreasonable can object during the trust’s accounting process or file a petition with the probate court under Probate Code § 17200.

The court reviews the work performed against the fees charged. If the fees are excessive — for example, a trustee charging $50,000 for administering a simple $500,000 trust with a few brokerage accounts — the court can reduce the compensation, order the trustee to repay overcharges, or in extreme cases remove the trustee.

Disputes are more common when the trustee is a beneficiary themselves, when the relationship between trustee and beneficiaries has broken down, or when the trustee hasn’t provided clear accountings. Transparent, regular communication and detailed records prevent most fee disputes.

When the Trust Specifies Trustee Compensation

If your trust document includes a compensation clause, it generally controls. A clause saying “the trustee shall serve without compensation” is enforceable in California, though courts can override it in narrow circumstances if circumstances make it unjust.

A clause specifying a percentage or hourly rate is also enforceable. Some trusts incorporate the trustee’s published fee schedule (common for corporate trustees) and allow updates over time.

If you’re drafting or updating a trust, consider whether to specify compensation or leave it to the default reasonable-compensation rule. Specifying creates certainty. Leaving it open creates flexibility but also potential disputes.

This article is for general information and is not legal advice. For guidance on your specific situation, contact Bay Legal, PC at 650-668-8000 to schedule a consultation.