Estate of Margaret S. Bevan

Case Number

SM111459

Case Type

Hearing Date / Time

Wed, 10/18/2023 - 08:30

Nature of Proceedings

Petition to Approve 22nd Accounting/Fees

Tentative Ruling

Probate Notes:

Appearances required. The following discrepancies are noted for the Court after supplement:

Discrepancy no 1: Trust estate lost $73,612.60 in carry value, or $152,089.91, during the accounting period.  Much of the loss was from the sale of stocks at a loss, which happens every accounting period. There does not appear to be any gains on sale. 

In this past, attorney(s) for the trustee explained these losses as purposeful so that capital gains taxes could be avoided.  Yet, curiously absent from the administration expenses are brokerage fees paid for the sale and purchase of stock.

A trustee has a duty to prudently invest (Prob. Code, §16046), and to make the trust profitable (Prob. Code, § 16007).  Thus, any losses incurred for capital gains reduction should be accompanied by proof that the profits earned from the appreciation of trust assets does not outweigh the tax consequences.  Stated more simply, if the trust is making money (which it is the fiduciary duty of a trustee to do), then taxes are appropriate to the degree that the taxes do not negate the gains.

Discrepancy no 2: “Fiduciary Commissions” are listed at $2,627.32 (for a total of $5,254.64) for each co-trustee, without further explanation. A “commission” is a payment derived from a percentage of a gain on sale.  If these “commissions” are the fees this court approves for the trustees, the entry needs to be labeled a trustee fee.

A supplement is required to explain why the co-trustees are paid commissions, and what the commission is paid on.

Discrepancy no 3: Trustee fees requested are calculated as a percentage of the trust value, without any explanation of the actual work the trustees performed, or billing statements of the hours spent on the tasks performed.  This is not a reasonable fee.

“[I]f the trust instrument provides for the trustee’s compensation, the trustee is entitled to be compensated in accordance with the trust instrument.  (Prob. Code, § 15680.) “If the trust instrument does not specify the trustee’s compensation, the trustee is entitled to reasonable compensation under the circumstances.” (Prob. Code, § 15681.) The appropriateness of the trustee fees are tempered by Rules of Court, Rule 7.776, which contains factors the Court must look to in order to determine the reasonableness of the request.

Trustee fee awards are analyzed pursuant to the factors listed in CRC, Rule 7.776.  As such, trustees must submit documentation of the hours spent, nature of work performed, rate charged, etc.

In this case, the Court cannot determine the reasonableness of the trustee fee as a result of no billing statements.  Denials or reductions of similar requests have been upheld for the following reasons:

“But the custom in the community as to charges by corporate trustees is only one of many factors which the Supreme Court has said that a judge must consider. Among the other factors, the routine character of the work done stands out clearly. As to the factor of time actually spent by the trustee, the trustee chose not to apprise the court concerning this matter. It appears, however, that what the trustee did would have consumed very few hours.”

(Estate of Nazro (1971) 15 Cal.App.3d 218, 221–222.)

PLEASE NOTE: Supplements must be served on all persons entitled to notice of the petition.  (CRC, Rule 7.53(b) [“A supplement to a pleading does not require additional notice of hearing, but a copy of a supplement to a pleading must be served if service of a copy of the pleading was required, unless waived by the court.”].)