Trustee fees in Florida: how they're calculated, paid and taxed

Trustee fees in Florida are usually paid as a flat fee, or as a percentage of the value of the trust.

The exact amount varies depending on:

• the type of trust
• the complexity and value of the trust
• the responsibilities of the trustee
• whether the trustee is professional or non-professional
• the agreement between the "grantor" (the person who made the trust) and the trustee

If the fee is a percentage of the value of the trust, it's usually between 0.5% and 2% in Florida.

Trustee fees in Florida are calculated based on a "reasonable fee" standard

In Florida, there are no statutory guidelines for trustee fees. Instead, fees are often determined based on a "reasonable fee" standard, but the Florida Trust Code doesn't say what exactly counts as reasonable.

Instead, it's a judgement call that takes into account the:

• complexity of the trust
• responsibilities involved
• expertise required
• time commitment
• success or failure of the management of the trust
• risk taken on by the trustee

Most of the time, the trustee's payment will be documented in the trust. If it isn't, the Florida courts will decide.

Trustees in Florida can be broadly categorized into two types: Professional and Non-Professional trustees. This distinction is important: the expected fees and the way those fees are structured are very different depending on the type of trustee.

Professional trustees usually charge 0.5% to 2% of the value of the trust each year — or they take a flat fee

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Professional trustees typically charge a flat fee or a percentage of the trust assets, ranging from 0.5% to 2% annually. However, the actual rates can vary depending on the specifics of the trust and the firm involved.

Professional trustees are typically corporate entities or individuals with specialized expertise in law, finance, or estate planning. They are often chosen to manage trusts due to their professional skills and experience. The fees for professional trustees are usually calculated as a percentage of the trust's assets or as a flat fee, depending on the complexity and size of the trust.

Flat fees are predictable, but they can be more expensive than paying by the hour if the trust is simple to manage.

A percentage-based fee is typically charged for larger, more complex trusts. In Florida, the percentage usually ranges from 0.5% to 2% of the trust's assets per year. This fee structure encourages the careful management of the trust, as the trustee's compensation is tied to the performance of the trust.

Non-professional trustees in Florida charge $25-$100 an hour, on average

Non-professional trustees, especially if they are family members or close friends, may choose not to take a fee. If they do, it could be an hourly rate, which might range from $25 to $100 per hour, a flat fee, or a small percentage of the trust's assets. Note that any such fee arrangement is subject to the approval of the probate court, which reviews the fees to ensure they are reasonable and commensurate with the trustee's duties.

Non-Professional trustees, on the other hand, are often chosen for their close relationship with the grantor and the beneficiaries. They may not have the same level of expertise as professional trustees. These trustees are typically compensated for their time and effort, but the fee structure is more flexible. They may receive an hourly wage, a flat fee, or even a small percentage of the trust's assets, depending on the agreement with the grantor.

The type of trust affects the trustee's fee

It's also important to note that the type of trust plays a role in the trustee compensation. Some trusts might needless time and expertise to manage, which means  lower fees. But if the trust is complex, with various assets and tax implications, the fees might be higher.

• Revocable Living Trusts: These are common and relatively straightforward trusts, primarily aimed at avoiding probate. For these trusts, a family member (non-professional trustee) may serve without compensation. If a professional trustee is chosen, they typically charge a flat yearly fee or a modest percentage of the trust's assets.
• Irrevocable Trusts: These trusts are often more complex and require more time and expertise to manage. The trustee fees for irrevocable trusts are typically a percentage of the trust assets, though the exact amount can vary depending on the intricacies of the trust.
• Charitable Trusts: Established for the benefit of a charitable organization, these trusts may come with unique responsibilities for the trustee, resulting in higher fees usually calculated as a percentage of the trust assets.
• Special Needs Trusts: These trusts are set up for a beneficiary who is physically or mentally disabled. The specialized management required for these trusts often results in higher trustee fees, usually a percentage of the trust's assets.

Trustees are typically paid out of the trusts assets, once expenses and taxes have been paid

The timing and frequency of trustee payment are usually dictated by the terms set out in the trust agreement. Generally, trustee fees are paid out of the trust's assets.

Professional trustees usually receive their fees annually, often divided and disbursed quarterly. Non-professional trustees who charge an hourly rate might invoice the trust monthly, quarterly, or annually, depending on the time commitment and tasks performed.

When the trustee is responsible for the final distribution of assets and the closing of the trust, they typically receive their final payment once all other expenses and taxes have been paid.

In Florida, having multiple trustees doesn't necessarily increase the overall cost

According to the Westcoast Hospital Association v. Florida National Bank of Jacksonville case, 100 So.2d 807 (Fla. 1958), trusts with more than one trustees don't necessarily have to spend more on trustee fees.

For example: let's say you have one trustee, and the court decides it's reasonable for you to pay them 2% of the trust's assets for the work they put into managing the trust. If that work was split between two trustees, it might be reasonable to pay them 1% each.

In Florida, it's up to the trustees to decide how they'll split payments, where the payment will be taken from, and which beneficiaries will pay out the most. If they can't, the courts will.

You can challenge trustee fees that are decided by Florida courts

In Florida, if the court awards a trustee a certain amount of compensation, and you don't think that compensation is fair, you can challenge it.

Should you decide to challenge it, bear in mind the responsibilities trustees have in Florida. According to Kay et al. v. Bostwick et al., 83 Fla. 308, 91 So. 112:

"Trustees are designated for fiduciary service, and their controlling duty is faithful and efficient conservation of the trust. Compensation to trustees, when permissible, is for service rendered to the trust; and it should be reasonable with prime reference to conserving the trust."

Trustees in Florida also have to keep careful records of their work to justify their fees:

"If the trustee fails to keep clear, distinct, and accurate accounts, all presumptions are against him and all obscurities and doubts are to be taken adversely to him. If he loses his accounts, he must bear any resulting damage”, from Traub v. Traub, 135 So. 2d 243, 244 (Fla. Dist. Ct. App. 1961).

Trustee fees are considered taxable income

Yes, the IRS considers trustee fees as taxable income. This applies to both professional and non-professional trustees. Trustees are required to report the fees they receive as income on their personal tax returns. If the trustee fee is the only income from self-employment, it might not be subject to self-employment tax. However, they should still be reported as income on their tax returns. 

For professional trustees, these fees are typically reported as business income. Trustee fees are also generally considered an administrative expense, which can reduce the taxable income of the trust itself.

Given the complexity of tax laws, it's always advisable to consult with a tax professional or an estate planning attorney to ensure accurate reporting and compliance with all pertinent tax regulations.