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How much can I charge as a trustee?

The question of reasonable compensation for a trustee or fiduciary often comes up. There is no black and white rule regarding reasonable compensation. Reasonable compensation means it depends–it depends on the surrounding circumstances of the administration. And the factors are proscribed in the Colorado Revised Statutes (CRS).

As the fiduciary (personal representative/conservator/agent/trustee), you are entitled to reasonable compensation. But what is reasonable? Reasonableness is determined by a number of factors in C.R.S. Section 15-10-603:

  • the type of labor required and whether a special skill or difficulty is required to perform the service properly;
  • the opportunity cost of not working your regular job;
  • the compensation is equivalent to what others in the community might charge for the same service;
  • nature and size of the estate; liquidity of the estate; results and benefits of the person’s actions;
  • life expectancy of the respondent/ward/protected person/beneficiaries
  • any time limitations or circumstances regarding the administration of the estate;
  • the expertise, special skills, reputation, and ability of the person performing the services; and
  • terms of the governing instrument

With those factors, I can provide some trial court examples:

(1995) Roger and Roy sought compensation of over 200 hours of labor as co-representatives of the estate. Roger charged $50 an hour and Roy charged $35 an hour. A beneficiary challenged the hourly rates as excessive. The trial court approved the compensation based on the following circumstances:

  • Both Roy and Roger left their jobs to be the co-representatives;
  • They would have had to hire someone at a similar rate;
  • The size of the estate was modest; and
  • One of the representatives was a highly-paid executive who left his job to perform his duties for the estate

Estate of Beren (2012) – The personal representative set his compensation at $375,000 per year. Before appointment, he was the CFO of the Berenergy Corporation. The decedent was Mr. Beren, who was the sole shareholder of Berenergy Corporation. Mr. Beren died in 1996, but this Court of Appeals case was not published until 2012. This means the litigation went on for years. Mostly, because of a spousal elective share issue and beneficiary fights. It is presumed the total value of the estate was hundreds of millions. From 1996 to 2010, the personal representative increased his annual salary to over 1 million a year. After an evidentiary hearing, the trial court concluded the compensation was reasonable. The court of appeals affirmed the decision, and it was based on the following circumstances:

  • The estate was unique, and it could not compare it to similar or customarily charged circumstances for most estates, because of the size and complexity.
  • The corporation was a closely-held business, and the fiduciary kept it very profitable during the administration of the estate.
  • It was the fiduciary’s only job, and he devoted his entire life to the company’s success.
  • The heirs substantially benefited from the fiduciary’s efforts despite their objections to his compensation.
  • By accepting this job, he was precluded from doing anything else.
  • Before accepting the appointment, he was the CFO of the Corporation and making a similar salary before requesting additional compensation.
  • The fiduciary’s compensation represented less than 1% of the estate’s value (market rate for fiduciaries who charge a percentage generally charge 1% of the total assets per year).

The last example is an outlier, but it assists the objective: If you provide a benefit to the estate, and your expertise justifies the wage, you are probably within a reasonable compensation. Sometimes benefit to the estate is not always pecuniary, but that is outside the scope of this article.

Based on the court examples and the firm’s experience, I have provided my own recommendations:

You are making $12-$18 an hour. Your education is between a high school diploma and a bachelor’s. You have no experience being a fiduciary. Your mother died, and she named you the personal representative of the estate. Result: reasonable compensation could be $20-$40 an hour. This represents a reasonable wage you would have pay someone else for most of the manual labor, inventory, and selling items. However, I recommend retaining an accountant and an attorney to protect your personal liability.

You are small business owner with expertise in bookkeeping, accounting, and inventory management. Result: reasonable compensation could be $40-$80 an hour. This represents your expertise in most tasks for estate administration, including supervision of employees, and your fiduciary services would preclude you from working.

You are a dentist, but you do not have expertise in bookkeeping and accounting, as that is delegated to someone else. Result: reasonable compensation could still be $60-$100 an hour. This represents your educational background to perform difficult tasks, supervise employees, and review complicated material. Further, there is an opportunity cost of neglecting your regular job to perform the fiduciary services. I still recommend retaining an accountant and an attorney to protect your personal liability.

If you choose to be compensated, I recommend obtaining court approval first to avoid any problems later. For more information or a consultation regarding compensation or estate administration, please contact the grand junction estate attorneys, Reams & Reams at 970-242-7847 or email us at ztreams@reamslaw.com.

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