Probate Code section 15680 subd. (a) provides that "if the trust instrument provides for the trustee's compensation, the trustee is entitled to be compensated in accordance with the trust instrument." This is a general principle of the law of trusts. However, if the trust instrument does not specify the trustee's compensation, the trustee is entitled to reasonable compensation under the circumstances (Probate Code section 15681).
In the case of Thomas Thorpe v. Audelith Jenivee Reed, Trustee, et al. (Ct. of App, 6th App., ca H037330), the Court of Appeal denied the petition of a court-appointed trustee of a special needs trust for compensation citing Probate Code section 15680 as the basis for its ruling.
To provide a brief background on the case, Danny Reed, the beneficiary, was 21 years old when he attended the Burning Man Festival wherein he suffered injuries when a drunken driver drove through his tent. His mother, Jolaine, filed a personal injury suit on Danny's behalf and was awarded a substantial amount of money that was conveyed to a special needs trust for Danny. Joliane was appointed as Special Trustee and Trustee.
The special needs trust provides for reasonable compensation to the trustee for services in the administration of the Trust. However, a special trustee and any successor trustee shall not be entitled to receive reasonable compensation for services in the administration of the trust.
In 2010, a Public Guardian reviewed the trust and found that Joliane had made some errors in managing the trust. The probate court removed Joliane as conservator and trustee and appointed Thomas Thorpe, a private fiduciary to act as temporary trustee. Thorpe subsequently sought to be appointed as permanent trustee and moved to amend the trust, including the provision that barred payments to successor trustees.
Danny filed an objection to Thorpe's petition for appointment as permanent trustee. He also filed a petition to remove Thorpe as temporary trustee and appoint his sister, Audelith as permanent trustee. Thorpe ultimately resigned as trustee and Audelith was appointed as permanent trustee.
Thorpe then filed a petition seeking to recover approximately $100,000 in trustee and legal fees. The trial court awarded Thorpe approximately $51,000 in claims explaining that "the Probate Court has the necessary jurisdiction and power to both appoint a successor trustee and to order payment for a temporary trustee regardless of the terms of the trust when it appears to the Court that the trust property or the interest of the beneficiary may suffer loss or injury. (Probate Code section 15642(e)).
More on this topic on subsequent blogs.
*This blog entry was not written by an Attorney and should not be construed as professional legal advice.