Right to Know Trustee Fees

I recently received a frantic call from Emily. Her mother had just passed, leaving a sizable trust. Emily, along with her siblings, were beneficiaries, and the trustee—a distant cousin—was proving remarkably opaque about the fees being charged. She feared he was siphoning off assets for personal gain, but lacked any concrete evidence. The immediate cost? Not just the potential loss of inheritance, but the emotional toll of suspecting a family member of dishonesty during an already devastating time.

As an Estate Planning Attorney and CPA with over 35 years of experience, I’ve seen this scenario play out countless times. Beneficiaries are understandably anxious about trustee fees, and rightfully so. It’s critical to understand your rights and the legal framework governing trustee compensation. As a CPA, I’m uniquely positioned to understand not only the legal requirements, but also the implications of those fees on the trust’s overall growth and eventual distribution—particularly the all-important step-up in basis and potential capital gains exposure.

What Fees Can a Trustee Charge?

Trustees aren’t volunteers; they are entitled to reasonable compensation for their services. However, “reasonable” is the operative word. California law doesn’t dictate a fixed fee schedule, so determining reasonableness can be complex. Trustees can charge for a variety of services, including:

• Administrative Fees: Covering tasks like record-keeping, tax preparation, and distribution of assets.
• Investment Management Fees: If the trustee manages the trust’s investments, they can charge a fee, usually based on a percentage of the assets under management.
• Legal Fees: For engaging attorneys to handle complex trust matters, such as litigation or property transfers.
• Professional Fees: Appraisals, accounting services, and other specialized expertise.

The key is that all fees must be reasonable in relation to the services performed and the size of the trust. A trustee charging 10% of the trust’s value for administrative tasks on a small trust would be clearly unreasonable.

What if the Trustee Isn’t Transparent?

This is where problems often begin. Trustees have an affirmative duty to keep beneficiaries “reasonably informed” about the trust’s administration. That includes providing information about fees. Specifically, Probate Code § 16060 & § 16062 states that trustees must provide a formal accounting at least annually. If your trustee is stonewalling you, you have legal recourse.

You can formally request an accounting in writing, detailing the period covered and the specific information you seek. If the trustee continues to refuse, you have the right to petition the court to compel them to do so. The court can also assess legal fees against the trustee if they unreasonably withheld information.

Can I Challenge Excessive Trustee Fees?

Absolutely. If you suspect the trustee is charging unreasonable fees, you can challenge them in court. This typically involves filing a petition for accounting and demonstrating that the fees are excessive.

Evidence that supports a challenge to trustee fees could include:

• Comparison to Industry Standards: Obtaining quotes from other trustees for similar services.
• Documentation of Services: Requesting detailed invoices and records of the trustee’s time and expenses.
• Trust Terms: Reviewing the trust document to see if it specifies how trustee fees should be calculated.

The court will consider all evidence and determine whether the fees are justified. If the court finds the fees unreasonable, it can order the trustee to refund the excess amount, potentially with interest and penalties.

What About a Trustee Who’s Just Difficult to Deal With?

Financial impropriety isn’t the only reason to consider removing a trustee. Probate Code § 15642 allows beneficiaries to petition for removal if the trustee is exhibiting “hostility or lack of cooperation” that impairs the administration of the trust. You don’t need to prove financial wrongdoing, simply that the trustee’s behavior is detrimental to the trust’s beneficiaries.

This can be particularly relevant when a trustee is unresponsive to requests for information, delays distributions, or generally creates unnecessary conflict. While removing a trustee can be a complex process, it’s a viable option when the trustee’s actions are harming the trust’s beneficiaries.

What causes California probate cases to spiral into delay, disputes, and extra cost?

Success in probate court depends less on the size of the estate and more on the accuracy of the petition and the behavior of the fiduciary. Whether the issue is a forgotten asset, a contested creditor claim, or a disagreement among siblings, understanding the procedural triggers for court intervention is the best defense against prolonged administration.

 
• Escalation: Prepare for litigating probate disputes if agreement fails.

 

• Validity: Understand the grounds for contesting a will.

 

• Trust Issues: Navigate complex trust litigation in probate.

Ultimately, the difference between a routine distribution and a protracted legal battle often comes down to preparation. By anticipating the demands of the Probate Code and addressing potential friction points with beneficiaries and creditors upfront, fiduciaries can navigate the system with greater confidence and lower liability.

Verified Authority on California Beneficiary Rights

• Statutory Notification Window (The “120-Day Rule”): California Probate Code § 16061.7
  This is the most critical statute for beneficiaries. Once a trustee serves this formal notice, you have exactly 120 days to file a contest. If you miss this deadline, you are generally forever barred from challenging the validity of the trust, regardless of the evidence you have.
• Right to Accounting & Information: California Probate Code § 16060 (Duty to Inform)
  Trustees have a mandatory legal duty to keep beneficiaries “reasonably informed” about the trust and its administration. Under Probate Code § 16062, most trustees must provide a formal financial accounting at least once a year. If they refuse, the court can compel them to do so.
• Inheriting Real Estate (Prop 19): California State Board of Equalization (Prop 19)
  Beneficiaries must understand that inheriting a home no longer guarantees low property taxes. Under Prop 19, to avoid reassessment to current market value, the child must make the home their primary residence within one year of the parent’s death.
• No-Contest Clause Enforceability: California Probate Code § 21311
  Fear of disinheritance often stops beneficiaries from fighting for their rights. However, this statute clarifies that a No-Contest clause is only enforceable if the contest is brought without “probable cause.” If you have a reasonable basis for your claim, your inheritance is likely safe.
• Recovering Trust Assets (Heggstad): California Probate Code § 850 (Heggstad Petition)
  If a beneficiary finds that a parent intended an asset to be in the trust but failed to sign the deed or change the account title, a Section 850 Petition allows the court to “transfer” that asset into the trust without a full probate proceeding.
• Removal of a Bad Trustee: California Probate Code § 15642
  Beneficiaries have the right to petition for the removal of a trustee who is unfit. Grounds for removal include excessive compensation, inability to manage finances, or “excessive hostility” toward beneficiaries that interferes with the trust’s administration.