Can a Trustee Receive Compensation
The ability of a trustee to receive compensation for serving as a trustee can often turn into a dispute between the trustee and the beneficiaries of a trust. To determine the amount of compensation (if any) a trustee is able to receive, you must look to the terms and conditions of the trust itself and to state law. In this article we will discuss trustee compensation under the Laws of the State of Ohio.
Look to the Trust Document
The first step in determining whether or not a trustee can receive compensation is to look at the trust document itself. Generally most trust documents will have a provision on trustee compensation such as: “The Trustee shall be entitled to a reasonable compensation based upon the time of the trustee and the size and character of the trust”.
The above reference is a very general provision on the trustee fees and absence a more definitive provision in the trust document, it must be determined what is meant by the term “reasonable”
Ohio Revised Code
The Ohio Revised Code does not have a definition of ‘reasonable' but merely states “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” [1]
What do the Local Court Rules State
The majority of the Courts in Ohio have their own local rules in regards to the computation of trustee fees for a trust that is administered through the local Probate Court. For example in the Probate Court of Cuyahoga County, Ohio; The Court permits a trustee fee of $12.00 per thousand on the first $1 million; $7.50 per thousand on the next $2 million; $5.50 per thousand on the next $2 million and $4.50 per thousand of the balance.
Trustee Keep Track of Time
If you are a trustee of a trust, it is important that you document the time that you have spent in your role as the trustee. Being a trustee is often more time consuming then many people realize especially if they have never served in that role beforehand. If a trustee has kept a detailed time log on the time that they have spent, it can help prevent any misunderstandings with the beneficiaries of a trust.
Communicate with Beneficiary
As a Trustee it is also very important to maintain communications with the beneficiaries of the trust. Not only does a trustee have a legal obligation to provide the beneficiaries with an annual accounting (and copy of the trust document) by communicating on a regular basis with the beneficiaries, they will appreciate how much work is actually involved on the part of the trustee.
Paying Taxes on it
A Trustee must pay federal, state and local income taxes on the trustee fee that they receive from the trust. This is an often an overlooked item when serving as a trustee.
Being a Trustee can be a very time consuming yet rewarding position for an individual. The creator(s) of the trust document had faith in the persons they named as a trustee to follow the terms and conditions of the trust. There can be a lot of work that is involved for a trustee and they have the ability to be compensated for their time and effort.
If you have any questions about this article or your ability to be compensated as a trustee of a trust please contact out firm.
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[1] O.R.C. 5807.08 (A)
