What If a Trustee Is Taking Too Much Money?

Yes.

In California, trustees are generally entitled to receive reasonable compensation for the work they perform administering a trust.

However, many beneficiaries become concerned when they discover that a trustee has paid themselves thousands of dollars from trust assets.

A common question is: How much is too much?

I recently received a question from a reader who asked whether a trustee compensating themselves $35,000 to administer a trust was too much.  

The answer depends on the circumstances.

A trustee’s compensation is not determined solely by the amount they receive. It is determined by whether the compensation is reasonable based on the services being performed and the complexity of the trust administration.

Trustees Often Perform Significant Work

Many beneficiaries underestimate the amount of work involved in administering a trust.

A trustee may be responsible for:

• Managing investments
• Paying bills
• Handling taxes
• Working with attorneys
• Hiring accountants
• Managing real estate
• Communicating with beneficiaries
• Preparing accountings
• Distributing assets

Some trusts can take months or even years to administer properly.

When a trust contains multiple properties, businesses, or substantial investments, the workload can become significant.

Is $35,000 Too Much for a Trustee?

Not necessarily.

The real question is not whether the trustee received $35,000.

The real questions are:

• How large is the trust?
• How much work was required?
• How much time was spent?
• What services were provided?
• Were professionals hired?
• Did the trust benefit from those services?

For example, if a trust contains several million dollars in assets and a trustee spends hundreds of hours managing investments, real estate, tax matters, and distributions, a $35,000 fee may be entirely reasonable.

On the other hand, if the trustee performs very little work and simply writes themselves a check, beneficiaries may have legitimate concerns.

Trustees Can Hire Professionals

Many beneficiaries become concerned when they see payments made to:

• Attorneys
• Financial advisors
• Accountants
• Tax professionals
• Real estate professionals

However, hiring experts is often part of responsible trust administration.

In many cases, trustees should seek professional guidance rather than attempting to handle complex legal or financial issues on their own.

A good financial advisor may help preserve or grow trust assets.

A trust attorney may help avoid costly legal mistakes.

An accountant may ensure tax returns are prepared properly.

The question is whether these professionals are providing legitimate services that benefit the trust.

Beneficiaries Have a Right to Information

One of the most important protections for beneficiaries is transparency.

Trustees generally owe fiduciary duties to beneficiaries.

That means trustees must act in the best interests of the beneficiaries and manage trust assets responsibly.

Beneficiaries are typically entitled to receive information regarding:

• Trust assets
• Trust income
• Trust expenses
• Trustee compensation
• Professional fees
• Distributions

If a trustee is paying themselves significant compensation, beneficiaries have a right to understand why.

What Is a Fiduciary Duty?

A fiduciary duty is one of the highest legal standards recognized by law.

A trustee must:

• Act honestly
• Avoid self-dealing
• Manage assets prudently
• Keep accurate records
• Treat beneficiaries fairly
• Follow the terms of the trust

Trustees cannot simply use trust assets as if the money belongs to them.

The assets belong to the trust and must be managed according to the trust document.

The Importance of Trust Accountings

A trust accounting is often the best way for beneficiaries to understand what is happening inside a trust.

A proper accounting may show:

• Beginning trust balances
• Income received
• Expenses paid
• Trustee fees
• Professional fees
• Asset purchases and sales
• Current trust balances

Without an accounting, beneficiaries may have difficulty determining whether compensation and expenses are reasonable.

This is one reason trustees should maintain detailed records throughout the administration process.

Warning Signs That May Require Further Investigation

Not every large trustee fee is inappropriate.

However, beneficiaries may want to ask additional questions if they notice:

• Missing records
• Refusal to provide information
• Unexplained withdrawals
• Excessive trustee fees
• Unusual transactions
• Delayed distributions
• Conflicts of interest

These issues do not automatically mean wrongdoing has occurred.

They do suggest that additional transparency may be necessary.

Why Communication Matters

Many trust disputes begin because beneficiaries do not understand what is happening.

A trustee may be doing everything correctly, but poor communication creates suspicion.

Regular updates can help beneficiaries understand:

• What work is being performed
• Why expenses are necessary
• How trust assets are being managed
• When distributions may occur

Clear communication often prevents misunderstandings from becoming legal disputes.

Can a Trustee Be Removed?

In some circumstances, yes.

If a trustee violates fiduciary duties or fails to properly administer the trust, beneficiaries may have legal remedies available.

Potential issues could include:

• Misappropriation of assets
• Self-dealing
• Failure to provide accountings
• Breach of trust
• Fraud

However, removing a trustee is a serious legal matter and generally requires more than simply disagreeing with a trustee’s decisions.

Choosing the Right Trustee Matters

Many trust administration problems can be avoided through careful trustee selection.

When choosing a trustee, consider:

• Trustworthiness
• Organization
• Financial responsibility
• Communication skills
• Availability
• Ability to work with professionals

Being a family member does not automatically make someone the best trustee.

How Trusts Help Protect Beneficiaries

One advantage of trust planning is ongoing oversight and management.

Unlike assets distributed outright through a will, trust assets can remain subject to trustee management and fiduciary responsibilities.

This structure often provides additional protection for beneficiaries.

Key Takeaways

• Trustees are generally entitled to reasonable compensation.
• Large trustee fees are not automatically improper.
• Beneficiaries have a right to information and transparency.
• Trustees owe fiduciary duties to beneficiaries.
• Trust accountings help explain compensation and expenses.
• Hiring attorneys, accountants, and financial advisors is often appropriate.
• Communication is one of the best ways to avoid trust disputes.

Frequently Asked Questions

Can a trustee pay themselves from a trust?

Yes. Trustees are generally entitled to reasonable compensation for services performed while administering a trust.

How do I know if trustee compensation is reasonable?

The answer depends on the size of the trust, the complexity of administration, the amount of work performed, and the results achieved.

Can beneficiaries request an accounting?

Yes. Beneficiaries are often entitled to receive information and accountings regarding trust administration.

Is it normal for a trustee to hire a lawyer?

Yes. Trustees frequently work with attorneys, accountants, and financial advisors to properly administer a trust.

What should I do if I think a trustee is taking too much money?

Start by requesting information and reviewing trust accountings. Understanding the services performed is often the first step in evaluating whether compensation is reasonable.

Protect Your Family’s Future

Schedule your free 30 minute strategy session with us or call (949) 377-2996 to make sure your estate plan is set up correctly.