When the trust says nothing
If the terms of a trust do not specify the trustee’s compensation, a trustee is entitled to compensation that is reasonable under the circumstances.
Section 736.0708(1), Florida Statutes.
That is the whole of the guidance. The Second District observed as much when it took the question up. The statute supplies the word reasonable and says nothing about how to calculate it or which circumstances count. We are paraphrasing rather than quoting there, because the electronic text of that passage is damaged by scanning and reproducing it would put stray punctuation inside the court’s words.
The test Florida actually uses
The gap matters enormously, because two established methods were available and they produce very different numbers. The lodestar method, which Florida uses for attorney fees, multiplies reasonable hours by a reasonable rate. The West Coast Hospital factors ask a broader question about the whole engagement. In Robert Rauschenberg Foundation v. Grutman the trustees had been awarded $24,600,000 and the Foundation argued the lodestar should have been used instead.
However, the legislative history of section 736.0708(1) indicates an intent to apply the West Coast factors.
Specifically, the Senate Staff Analyses in support of the bill reference section 736.0708(1) and explain, ‘On the factors to be taken into account in determining a reasonable compensation, see West Coast Hospital Association v. Florida Nat’l Bank of Jacksonville, 100 So.2d 807 (Fla.1958) citing with favor Bogert, Trusts and Trustees, s.976.’
Accordingly, we conclude that the lodestar method set forth in Rowe does not apply to trustee’s fees.
Robert Rauschenberg Foundation v. Grutman, 198 So. 3d 685 (Fla. 2d DCA 2016), rehearing denied February 24, 2016.
The factors the court drew from Bogert are worth knowing before any conversation about a fee. They are the amount of capital and income received and disbursed; customary wages for similar work in the community; the success or failure of the administration; unusual skill or experience; fidelity or disloyalty; the risk and responsibility assumed; the time consumed; community custom for trustee allowances and trust company and bank charges; the character of the work, meaning routine work as against work requiring skill and judgment; the trustee’s own estimate of the value of the services; and payments already made toward compensation.
Two of those repay attention. Success or failure of the administration means results are on the table, which no hours based calculation captures. Fidelity or disloyalty means a trustee’s conduct bears on what the trustee is paid, not merely on what the trustee owes. Both sides in Rauschenberg put on expert testimony, which is the ordinary way these are tried. And the court rejected a bare percentage of the corpus as well, which West Coast itself had rejected.
When the trust does set a figure
If the terms of a trust specify the trustee’s compensation, the trustee is entitled to be compensated as specified, but the court may allow more or less compensation if:
(a) The duties of the trustee are substantially different from those contemplated when the trust was created; or
(b) The compensation specified by the terms of the trust would be unreasonably low or high.
Section 736.0708(2), Florida Statutes.
This runs in both directions and is usually remembered in only one. A beneficiary can attack a specified fee as unreasonably high. A trustee can also ask for more where a trust written decades ago fixed a figure that no longer matches the work, or where the administration turned out to involve duties nobody contemplated, such as running a business or litigating for years.
Subsection (3) adds that a trustee who renders other services in connection with the administration is allowed reasonable compensation for those services on top of compensation as trustee.
The attorney as trustee rule, and it has no case law
Subsection (4) was added in 2020 and is the most consequential part of this section for anyone whose trust names their lawyer. The rule is blunt. An attorney serving as trustee, or a person related to that attorney, is not entitled to compensation for serving as trustee if the attorney prepared or supervised the execution of the trust instrument that made the appointment, unless the appointee is related to the settlor, or the attorney made three specified disclosures to the settlor before the instrument was executed.
The three disclosures are that any person is eligible to serve as trustee, including a family member, a friend or a corporate fiduciary; that any person who serves, including an attorney, is entitled to reasonable compensation; and that trustee compensation is in addition to any attorney fees for legal services to the trustee. The settlor must then sign a separate written acknowledgment that the disclosures were made.
Two definitions do a lot of work. Preparation is attributed to the whole firm, so an instrument drafted by any attorney or employee at the firm counts. And "related" reaches a spouse, lineal ascendants and descendants, siblings, a relative of the individual or their spouse with whom the attorney maintains a close familial relationship, spouses of those people, a cohabitant, and any employee or attorney at the same firm. Naming a partner rather than yourself does not avoid the rule.
Two limits are worth stating as plainly as the rule. Under paragraph (4)(e) the failure to obtain the acknowledgment does not disqualify the trustee from serving and does not affect the validity of the trust instrument. The sanction is loss of compensation and nothing else. And under paragraph (4)(d) the subsection limits compensation only, leaving other rights and remedies intact.
The subsection applies to appointments under trust agreements executed by a Florida resident on or after October 1, 2020, and to amendments executed on or after that date that nominate the drafting attorney or a related person. No Florida court has construed any part of it. Neither of the two decisions citing this section could have. One predates the subsection by four years, and the other never mentions it.
Which assets pay
The other Florida decision citing this section, Lanford v. Phemister, does not tell us what reasonable means. It cites the section once for the black letter proposition, articulates no test, and expressly declines to review the reasonableness finding because no hearing transcript was in the record. It is useful for a different question.
Trustees are ‘entitled to compensation that is reasonable under the circumstances.’ § 736.0708(1), Fla. Stat. (2021); see also § 736.05053(4), Fla. Stat. (2021) (providing that trust administration fees, including trustee fees and trustee’s attorney’s fees, should be paid before estate administration fees).
Trustees are also allowed reimbursement for reasonable trust expenses. § 736.0709(1), Fla. Stat. (2021).
Lanford v. Phemister, No. 5D21-1015 (Fla. 5th DCA Apr. 8, 2022). The opinion carries the legend “NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED” and no reporter citation had issued.
That case turned on whether homestead sale proceeds could pay the fees of a woman serving in two capacities. The Fifth District held they could not pay her fees as personal representative, because constitutional homestead protection barred it, but could pay her fees as testamentary trustee. The capacity in which work is done decides which pot it comes out of, and that distinction is easy to lose when the same person wears both hats.