Question: My father passed away a couple of years ago, and my sister was made the trustee of my parents’ trust, which simply says that the property is to go to me and my sister equally. My parents left behind a house and some vacant parcels of real property in the mountains. The properties were all sold over a year ago.
After the past two years, my sister says that she is ready to distribute the funds in the trust. I have been on her for at least the past year to distribute. After the properties were sold, she has never given me one good reason why the distribution needed to be delayed. I finally received a letter from her lawyer with some documents that show she would like to take tens of thousands of dollars in trustee fees. Even though she never worked a job that paid more than $20 per hour, she’s charging me $50 per hour for her work.
Had she done a decent job and actually distributed the trust in a timely manner, I might be willing to look the other way. But her delay over the past year has cost me an opportunity to get in on a business, something that would have made me a fair amount of money. Can I challenge her on the fees? Can I sue her for the loss that her delay caused?
Answer: Although the administration of a trust is usually faster than the alternative of handling the estate through the probate court, the trust administration process can take some time. Depending on the circumstances, your sister’s administration of the trust over the past two years may be justified.
As a beneficiary, the law provides you with a right to information on the administration of the trust, and your sister should be able to tell you why the process has taken two years. As to your two questions, you have the right to challenge your sister on the amount of her trustee fees, but you probably do not have the ability to hold her responsible for your lost business opportunity.
The paperwork from your sister’s lawyer probably includes a trust accounting. This document should list the trust’s income and expenses over a certain fixed period of time, usually from the date of death to a more recent time. The trustee’s fees should be listed in the accounting. A trustee’s fees are a valid trust expense, but you should look to the trust document to see how the fee is calculated. If the trust is silent on the topic, state law allows for the trustee to take “reasonable” compensation. As you can probably guess, that definition invites more questions than answers.
Reasonable compensation is determined by what others in the area are doing. In the Bay Area and Los Angeles, the rate of compensation may be higher than around here. In our area, trustee rates for a non-professional usually range from $35 to $50 per hour, depending on someone’s skills. A flat fee of 1 percent of the value of the trust estate is also considered reasonable. So your sister’s compensation rate doesn’t sound off the mark. But you may be able to challenge excessive time spent on certain tasks or expenses that were not incurred in her duties as trustee.
As a beneficiary, you have a set period of time in which to object to your sister’s accounting of transactions. The accounting should be accompanied by a sheet of paper in large font telling you exactly how many days you have to object. Take this warning seriously. If you do not object in writing to the trustee, you may lose your right to later challenge your sister’s actions in a court of law. So go through the accounting and put your objections down in writing.
You may want to consult with a lawyer for advice on your objections. In many instances, a well-placed objection will result in a negotiated compromise, and the trust administration can then be wrapped up. But if your objections cannot be compromised, it may be necessary to file a petition in the probate court to have those objections ruled on by a judge.
Although your sister’s delay in distribution may have caused you to lose a business opportunity, it is not likely that you will be able to hold her, as trustee, legally liable for your loss. The liability of a trustee for breach of fiduciary duty applies to the losses that the trust maintains. A trustee is not liable for personal damages to beneficiaries arising from what they would have done with a trust distribution.
It’s hard to judge the quality of your sister’s work without a full picture of what has happened, but you are entitled to an explanation. If necessary, you should make your objections in writing and then do your best to resolve them short of going to court.
Preston Morgan is a partner at Kopper, Morgan & Dietrich, a Davis law firm providing family law, estate planning and trust litigation representation. His column is published every other week in the Davis Enterprise. To pose a question to Preston Morgan, contact him at https://kopperlaw.com.
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