How does my Executor/Successor Trustee get paid?

A lot of times people are concerned that their executor or their successor trustee gets compensated for their time and effort administering their estate.

An executor refers to the person administering the estate when there is a will (or no will) and those fees are set by statute (aka state law). Here’s the link to the fees in California.

If you have a trust, then your successor trustee is the person who manages your estate and who would be entitled to compensation. Typically, a trust specifies that a trustee is entitled to “reasonable compensation.” Reasonable compensation usually has to do with the amount of time and effort. To get compensated, a trustee must keep track of their time (preferably by 15 minute increments) and specify what they did.

For example, “12/1/22, 1:05pm, phone call to Bank of America, talked to Sally Smith for 10 minutes about how to transfer assets into the new trust account.” Yes, that kind of specificity is necessary.

A trustee’s fee is considered compensation, and therefore must be reported as income tax. Many times people who are beneficiaries AND trustees, would rather waive compensation and receive the assets as a beneficiary so they are not taxed on the money.

A trustee does NOT have to pay for things out of his or her pocket. They use the trust to pay for things. Typically, the trust pays all expenses, the trustee is compensated, and assets are divided per the terms of the trust.

If you are a trustee, you should speak to an attorney about the best way to receive compensation and how to track your time, trust expenses, and all other details that must be tracked. Contact me today.