Estate of Margaret S. Bevan

Case Number

SM111459

Case Type

Hearing Date / Time

Wed, 12/06/2023 - 08:30

Nature of Proceedings

Petition to Approve 22nd Accounting/Fees

Tentative Ruling

Probate Notes:

Appearances required.

After Supplement filed on November 29, 2023, the following issues are noted for the court to address at the hearing:

Formatting/code compliance.  The accounting is not presented in compliance with Probate Code sections 1060 et seq. According to section 1061(a) of the Probate Code, the schedules attached to the summary of account should be the following:

(1) The property on hand at the beginning of the period covered by the account, which shall be the value of the property initially received by the fiduciary if this is the first account, and shall be the property on hand at the end of the prior account if this is a subsequent account.

(2) The value of any assets received during the period of the accounting which are not assets on hand as of the commencement of the administration of an estate.

(3) The amount of any receipts of income or principal, excluding items listed under paragraphs (1) and (2) or receipts from a trade or business.

(4) Net income from a trade or business.

(5) Gains on sales.

(6) The amount of disbursements, excluding disbursements for a trade or business or distributions.

(7) Loss on sales.

(8) Net loss from trade or business.

(9) Distributions to beneficiaries, the ward or conservatee.

(10) Property on hand at the end of the accounting period, stated at its carry value.

Continual losses without explanation.  As noted previously, the Trust lost $73,612.60 in carry value, ($152,089.91 in market value), during the accounting period.  There is a sale of securities for a loss of $2,914.57 without explanation why the securities had to be sold for a loss.  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 in the disbursement schedule 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.

While the primary reason for loss of value appears to be due to several distributions of income and principle, there is no explanation given of why those distributions were made.  If there are no objections by any of the beneficiaries, the Court can overlook this issue under the current circumstances.

Trustee Fees not calculated in compliance with Rules of Court.  The 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 the lack of billing statements.  The supplement filed on November 29, 2023 attempts to estimate the time spent on categories of tasks, but arrives at a loosely estimated figure of 51-73 hours total time spent on trust administration for the year.  Because this translates to (roughly) $132/hour, and because this court regularly approves Professional Fiduciary fees at $135-150 per hour, the Court should approve the fees for this petition, with a warning that future fees based only on a percentage will not be approved.

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.)

Unreasonable Attorney’s Fees. Petitioner requests $5,655.50 in attorney’s fees, for 26.30 total hours of work. The bulk of the work was performed by a paralegal at $148.56, while 4.1 hours were spent by three different attorneys.  Many of the entries were described with one word…”bookkeeping.”  Not only is that description, and all but 5 of the remaining descriptions not sufficient in detail for the Court to determine the reasonableness, necessity, or benefit to the trust that these entries entail, but the Court should question why the attorney for the trustees is being paid for bookkeeping when the trustees should be doing that work as is their fiduciary duty to do so.