In Spear v. Denmark, the Florida probate court significantly reduced the amount of trustee fees and costs requested by the trustee, and also reduced the hourly rate of the trustee’s expert witness. The Florida appellate court ruled that competent, substantial evidence supported the Florida probate court’s reduction of the trustee fees and costs award, but that the reduction of the expert’s hourly rate was error.
The Facts of Spear v. Denmark
Between January and June 2010, the beneficiary of the trust, seeking the termination of the trust pursuant to its terms, asked the trustee to make a distribution, resign, and forgo a full, final accounting. The beneficiary insisted that the beneficiary’s attorney would, in lieu of an accounting, review the raw data.
Instead of following the beneficiary’s directive, the trustee made three partial accountings of the trust during that six month period. The trustee refused to resign unless the beneficiary released the trustee from all liability. The beneficiary refused, and sued.
The trustee moved for fees and costs pertaining to the three accountings, time spent defending against the beneficiary’s suit, and time spent by the trustee’s expert witness in preparation for the evidentiary hearing on the award.
The trustee sought over $80,000 for work performed on behalf of the trust. The Florida probate court awarded approximately $8,400, mainly upon a determination that much of the alleged work performed by the trustee was neither necessary nor authorized.
When Can The Court Determine The Amount Of A Trustee Fee Award?
The Florida probate courts are often called on to review or set trustee fee awards. Florida law provides that “if the compensation of the trustee has not been fixed by statute or direction of the settlor, the amount of the award rests in the discretion of the court having jurisdiction, which is ordinarily the court receiving the account of the trustee.”
An award of trustee’s fees and costs is reviewed by a Florida appellate court for an abuse of discretion.
What Test Is Applied To Calculate Trustee Fees in Florida?
The test to make an award of trustee fees is referred to as the West Coast test, and requires the examination of several factors to determine the appropriateness of a trustee fees award. The factors include:
- Amount of capital and income received;
- Customary wages and salary;
- Success or failure of trustee’s administration;
- Unusual skill or experience possessed by trustee;
- Trustee’s loyalty or disloyalty;
- Amount of responsibility assumed by trustee;
- Time consumed by trustee in serving trust; and,
- Customary charges by trust companies for similar work
Here, the evidence showed that the court considered two of the factors: the amount of time spent and value of services provided by the trustee. In response to appellant’s argument that the court incorrectly applied the lodestar method, which does not apply to trustee’s fees, the Florida appellate court stated:
The mere fact that the only two factors for which there was either sufficient or credible evidence in this case are the two that coincidentally happen to be used in the lodestar method, and that the trial court did not expressly assert its application of the West Coast test does not mean that it failed to apply it as far as the evidence allowed it.
The appeals court upheld the award as to the trustee’s fees and costs, despite the award being substantially less than the trustee sought. The award was supported by competent, substantial evidence. The Florida appeals court reversed the portion of the award calculating the trustee’s expert witness’ hourly rate based upon a different (lower) hourly rate than testified to at the hearing.
The trustee was specifically instructed by the beneficiary not to do accountings. Instead, the trustee prepared three accountings within a short time period and then demanded over $80,000 in fees and costs. While the reduction in the amount may at first blush seem extreme, the work performed by the trustee was unnecessary, unauthorized, and performed in contravention of the beneficiary’s instruction. It is not surprising that the Florida probate court reduced the fee significantly and declined to award the trustee fees for work that was completely unnecessary.