By James Burns, Esq. | Law Office of James Burns | www.jamesburnslaw.com

Introduction: Getting Paid to Serve—The Right Way

Serving as a trustee in California is not just an act of family service or fiduciary duty—it's also a legally compensable role. Yet one of the most common questions I receive from both appointed trustees and beneficiaries is:

“How should a trustee in Orange County be paid—hourly or by percentage?”

This blog will walk you through the legal framework, typical fee structures, and strategic considerations for private trustees in California. Whether you're a family member managing a modest estate or a professional fiduciary overseeing a multimillion-dollar trust, this article is designed to help you make a fair, legally defensible decision.

Understanding Trustee Compensation Under California Law

Under California Probate Code § 15681, unless the trust instrument says otherwise, trustees are entitled to “reasonable compensation under the circumstances.” But what constitutes reasonable?

Reasonableness depends on:

• The size and complexity of the trust
• The time required to manage the trust
• The trustee's skill or professional background
• Local customs—in this case, Orange County market rates

Whether you're a successor trustee stepping in after a loved one's death or a professional fiduciary, the method and amount of compensation must always align with fiduciary obligations.

Read more: What Is Fiduciary Duty in California Trust Law?

Three Core Ways to Structure Trustee Compensation

There are three primary ways to charge for trustee services in California:

1. Hourly Billing Model

✅ Best for: Simple or short-term trusts, or estates under $2.5M
❌ Watch out for: Time-tracking burden and under-compensation for complex tasks

Typical Hourly Rates in Orange County:

• Private family trustee: $100–$250/hr
• Professional fiduciaries: $200–$350/hr
• Attorneys or CPAs as trustees: $300–$450+/hr

Hourly billing ensures transparency and limits conflicts with beneficiaries, but it may become tedious for long-term administration or multi-asset trusts.

2. Percentage of Trust Assets (AUM-Based)

✅ Best for: Larger estates ($3M+), trusts with long-term oversight (e.g., rental property, complex portfolios)
❌ Watch out for: Beneficiaries questioning fairness if workload is light

Common Tiered Structure Used by Trustees:

• 1.00% on first $1,000,000
• 0.75% on next $4,000,000
• 0.50% on trust assets above $5,000,000

This method is widely used by corporate trustees like banks or trust companies. It works best when the trust has ongoing management needs, multiple beneficiaries, or illiquid assets like real estate.

Explore: Orange County Real Estate in Trust—When Should Trustees Sell or Hold?

3. Flat Fee or Hybrid Model

✅ Best for: Trustees with clearly defined tasks or a desire for predictable revenue

Examples:

• Flat Fee: $5,000–$15,000/year
• Hybrid Fee: $7,500 base + $250/hr for extraordinary services like litigation, business asset management, or trust termination

Hybrid models allow flexibility while addressing spikes in administrative workload, which hourly or percentage-based fees may not capture fairly.

When Percentage Works Better: The $3M+ Threshold

If the trust exceeds $3M, percentage-based compensation often results in fairer value for the trustee's ongoing liability, complexity, and effort. For example:

📊 Scenario A: $5M Trust in Newport Beach

• Rental income, stock portfolio, and three beneficiaries
• Trustee manages distributions, coordinates taxes, and oversees real estate upkeep

Hourly Compensation: $275/hr × 200 hours/year = $55,000
1% of Assets: $50,000

The percentage method is easier to calculate, justifiable, and aligns with industry standards.

Documenting the Fee: Sample Trustee Compensation Clause

When setting compensation, transparency is key. Whether you're updating a trust or preparing to serve, include a fee clause like this:

📄 Sample Trustee Compensation Clause

"The Trustee shall receive compensation as follows:
(a) 1.00% of the first $1,000,000 of trust assets;
(b) 0.75% on the next $4,000,000; and
(c) 0.50% on amounts exceeding $5,000,000,
calculated annually and payable in quarterly installments. Extraordinary services shall be compensated separately at a rate of $____ per hour."

Need help drafting trustee clauses or reviewing an outdated trust?
📩 Schedule a Consultation with our office.

Fiduciary Responsibilities: More Than Just Money

No matter how you're compensated, your responsibilities as trustee include:

• Acting prudently and loyally
• Avoiding self-dealing
• Providing regular accountings
• Following the terms of the trust

Charging a fee does not exempt you from liability. In fact, compensation heightens scrutiny by beneficiaries and the court.

See also: Common Trustee Mistakes That Lead to Lawsuits in California

When a Court Gets Involved

If beneficiaries challenge trustee fees, a judge will evaluate:

• Time spent and complexity
• Trustee qualifications
• Local market rates
• Value added to the trust

A lack of clear documentation or vague billing records can lead to fee reductions or court-ordered disgorgement.

How to Protect Yourself as a Trustee

If you are serving or preparing to serve as trustee, here are 5 best practices:

1. Include a Written Fee Agreement—Don't rely on informal understandings
2. Track Time Diligently—Even if using a flat or percentage model
3. Disclose Compensation to Beneficiaries—Prevent surprises
4. Use a Corporate Fiduciary for Larger Trusts—If you're uncomfortable with the liability
5. Hire Counsel to Guide You—We can help at every step

Related Post: Do You Need a Lawyer to Be a Trustee in California?

Our Office's Approach to Trustee Support

At the Law Office of James Burns, we assist both individual trustees and trust creators in structuring clear, fair, and defensible compensation models.

We offer:

• Custom trustee fee schedules
• Legal opinions on reasonableness
• Assistance with notifying beneficiaries
• Defense support in the event of fee challenges

We also advise clients on related issues like California Proposition 19 tax planning, trust real estate management, and Structured Installment Sales for trust-owned property.

Learn more: Trust Tax Suppression Strategies—California and Beyond

 

🔍 Frequently Asked Questions About Trustee Compensation in California

💰 What is the average trustee fee in California?

In high-net-worth areas like Orange County, the average trustee compensation typically ranges from 0.75% to 1.25% of trust assets annually, or $150 to $450 per hour depending on the trustee's qualifications.

✅ Can a trustee pay themselves in California?

Yes. Under California Probate Code § 15681, a trustee is legally entitled to receive reasonable compensation, unless otherwise limited by the trust. All fees must be properly disclosed to beneficiaries.

👪 Do family member trustees get paid in California?

Yes. Even if you're a non-professional trustee, you are still entitled to reasonable trustee fees. Compensation must reflect the time, skill, and complexity involved in managing the trust.

⚖️ Which is better: hourly compensation or a percentage of assets?

If the trust is under $2.5 million, hourly trustee fees may be fairer. For trusts over $3 million, a percentage-based fee (typically 1%) may be more practical and aligned with market standards.

🚨 Can trustee fees be challenged by beneficiaries?

Yes. Beneficiaries can file a petition in court if they believe trustee fees are excessive or undocumented. A judge will evaluate the reasonableness of the compensation based on California trust law.

📊 Is trustee compensation considered taxable income?

Yes. Trustee fees are ordinary income and must be reported on your personal tax return. If you're both a trustee and a beneficiary, consult a CPA for proper tax reporting.

📝 Can a trustee waive compensation?

Absolutely. A trustee may waive trustee fees for personal or tax reasons. This decision should be in writing and communicated to all trust beneficiaries to avoid future conflict.

📃 What if the trust is silent on compensation?

If no fee structure is stated in the trust, the trustee is still entitled to reasonable compensation under California law. A judge will assess local custom, trust complexity, and fiduciary duties when determining fairness.

Conclusion: Make the Right Move—Before You're Criticized

Whether you're about to serve as a trustee or you're drafting your own estate plan, deciding how a trustee is paid is not just a financial issue—it's a legal one.

At the Law Office of James Burns, we help fiduciaries across Orange County make smart, compliant, and conflict-free choices. If you're unsure whether to use an hourly or percentage model, or need help documenting your trustee fees, reach out today.

📞 Call (949) 305-8642
📧 Email [email protected]
🌐 www.jamesburnslaw.com

⚖️ Legal Disclaimer

This blog post is provided for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult an attorney licensed in your jurisdiction.