Florida Probate, Trust & Guardianship Litigation

Complete Guide to Trustee Fees

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.

 

 

A Florida trustee can charge a trust for incurred expenses if the services are necessary and incurred for the benefit of the trust.  In the June 2020 opinion of In re Bloom, the Florida appeals court reminded practitioners that the trustee must actually be the trustee to charge expenses to the trust.

The Facts of In re Bloom

Leon Bloom executed a Trust in 1988.  After Leon became temporarily incapacitated in 2012, Robert Johnson (Leon’s attorney) assumed the role as trustee of the Florida Trust.

Johnson filed a guardianship proceeding and sought to have Leon’s nephew, Marshall, appointed as emergency temporary guardian.  Dorothy, Leon’s wife, sought reimbursement from the Trust for money that she spent to care for Leon.  Dorothy was represented by Marc Soss.

The parties entered into a settlement agreement, which was ratified by the Florida guardianship court.

The Trust was added as a party to the guardianship proceeding, Johnson resigned as trustee, and a trust company became trustee.

The Florida Guardianship Court Orders That A Successor Trustee “Shall Be Presented For Appointment”

In 2015, after Leon died, the trust company trustee was permitted to resign, and the court ordered that “a successor trustee shall be presented for appointment by” July 23, 2015. The court found that Johnson was “an interested party for purpose of notice and objection to [the] successor trustee.”

Dorothy appointed her lawyer, Marc Soss, and Raymond James Trust, N.A. as successor trustees, but did not file her notice or present it to the court. Johnson objected to Soss serving as successor trustee due to a conflict of interest.  Raymond James declined to serve.

Disqualification Hearing

In August 2015, Johnson died.  Marshall, as personal representative of Leon’s estate, was substituted for Johnson as petitioner in the guardianship proceeding.  Marshall sought to disqualify Soss as successor trustee.

Two days before the hearing on Soss’ disqualification, Soss withdrew as Dorothy’s counsel in the guardianship proceeding.  Marshall, as personal representative of Leon’s estate, filed a motion to compel Soss to return any fees paid from the Trust.

Soss was removed as successor trustee.  As summarized the Florida appeals court:

The court found that Soss’s representation of Dorothy in her claim against the Trust while simultaneously serving as Successor Trustee of the Trust created an irreconcilable conflict of interest that was not cured by his subsequent withdrawal as counsel for Dorothy. The court further found that Dorothy’s purported appointment of Soss was never confirmed by the court as mandated by its order approving of Caldwell’s resignation. The court also removed Marshall as personal representative of Leon’s estate and appointed Robert M. Elliott to serve as Trustee of the Trust and personal representative of Leon’s estate.

Hearing To Return Fees From The Trust

After being removed as personal representative of Leon’s estate, Marshall appeared individually in the Florida guardianship proceeding and filed an amended motion for an order compelling Soss to return any fees paid from the Trust during his purported service as trustee.  Soss noticed his appearance as co-counsel for Dorothy.

The evidence at hearing showed that Soss, while purporting to act as trustee during a roughly eight-month period, paid:

  • $45,360 to himself from the Trust
  • $82,500 to the attorney that defended him in the disqualification proceeding
  • Overpaid Dorothy by about $62,000.

Of those amounts:

  • Soss’ attorney paid back almost $19,000.
  • Soss did not return any of the funds that Soss took from the Trust.

Soss testified that he held $20,000 from the Trust.  The court sua sponte ordered Soss to return the $20,000 to the Trust.

The circuit court asked Soss about the order permitting the corporate trustee to resign that stated that “a successor trustee shall be presented for appointment by the end of” July 23, 2015, and that “Robert M. Johnson is an interested party for purpose of notice and objection to [the] successor trustee.” Soss responded that the order did not specifically say that it had to be presented to the court; instead, it had to be “presented for appointment to the beneficiaries of the trust and Robert Johnson, as an interested party.”

Marshall filed a supplemental motion for order compelling Soss to return the funds to the Trust.

The circuit court found that ” it was clear that there was an objection to Mr. Soss serving as co-trustee or trustee [and] that he was on notice of that fact throughout the time.” The court also found “it incredible to believe in good faith that [the order approving of Caldwell’s resignation as successor trustee] was somehow misinterpreted” and that “it was clear that a successor trustee had to be presented and approved by the court or confirmed by the court,” which was never done.

Is A Person Serving As A “De Facto” Trustee Entitled To Fees From The Trust?

A person serving as a “de facto” trustee who knows that he is not serving as an appropriate trustee is not entitled to payment of fees and expenses from a Florida trust.

“A trustee has the burden of proving the necessity of all expenses incurred by him or her, including attorneys’ fees.” Ortmann v. Bell, 100 So. 3d 38, 46 (Fla. 2d DCA 2011).

When a trustee seeks to charge a trust corpus with an expense incurred by him, including attorney fees, the burden of proof is upon the trustee to demonstrate that the expense was reasonably necessary and that such expense was incurred for the benefit of the trust, and not for his own benefit nor the benefit of others.  Barnett v. Barnett, 340 So. 2d 548, 550 (Fla. 1st DCA 1976) (emphasis added).

Soss testified about the services he performed while he served s successor trustee.  Soss argued that he was entitled to compensation for acting as a “de facto” trustee.  However, the Florida guardianship court determined that Soss was not entitled to compensation when “he knew or should have known that he should not have made the payments because he was not an appropriate trustee.”

Soss knew that the Florida court’s order required the proposed successor trustee to be presented to the court, and that his appointment by the court to serve as trustee had not been approved.  Therefore, the court concluded that Soss, who should have known that he was not actually the trustee, was not entitled to his fees from the trust.

Do Payment Of A Trustee’s Attorneys Fees Have To Benefit The Trust?

Yes, payment of a trustee’s attorneys fees must benefit the trust, not just the trustee.  Here, the Florida guardianship court did not order non-trustee Soss to return the payment of fees from the Trust to Soss’ attorney, Waskom.  Although the court found that the payments to Waskom were “ill-advised and inappropriate,”  the court did not order Soss to return the payments.  The court concluded that it “would be inappropriate and an undue punishment” to Soss, because the payments had gone to Waskom, not Soss directly.

The Florida appeals court reversed the guardianship court and required non-trustee Soss to return all of the fees paid to his attorney from the Trust, stating:

However, as Marshall correctly contends, those funds went to his attorney for the benefit of Soss—not for the benefit of the Trust. Cf. McCormick v. Cox, 118 So. 3d 980, 987 (Fla. 3d DCA 2013) (affirming disallowance of attorney’s fees that trustee paid to law firm in beneficiaries’ action to remove trustee for breaches of fiduciary duties). Given that Soss failed to demonstrate that his payments to Waskom were “for the benefit of the trust, and not for his own benefit,” the circuit court abused its discretion in failing to order Soss to return those funds to the Trust. See Barnett, 340 So. 2d at 550.

Here, Soss was not actually the trustee of the trust.  He should have known that based upon the court’s order requiring that the nominated successor trustee was to be presented to the court.  Soss was not entitled to payment of his expenses from the Trust, and was not entitled to pay his attorney from the Trust.

 

 

 

Oral Argument at 5th District Court of Appeals

Florida Probate Attorney Jeffrey Skatoff Arguing in Court

Jeffrey Skatoff

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(561) 842-4868

jeffrey@skatoff.com

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