607-18

Compensation of trustees

§607-18 Compensation of trustees. (a) Unless the trust instrument otherwise provides, or the settlor and trustee otherwise agree, or, after the settlor’s death, all the beneficiaries and the trustee otherwise agree, the trustee shall be entitled to the compensation set forth in this section and the compensation shall be deemed to be reasonable. For good cause shown, the court may also approve any other fee arrangement that it deems reasonable.

(b) Banks, trust companies, and individuals who in the ordinary course of business serve as fiduciaries shall, when serving as trustees, be entitled to reasonable compensation, which may be set forth in their published fee schedules and may be amended from time to time; provided that advance written notice of any amendment to the fee schedule is provided to the settlor or, after the settlor’s death, to all beneficiaries who are vested at the time of the notice.

(1) Compensation Upon Inception of the Trust:

(A) One per cent based upon the gross fair market value of the trust assets on the date of the trustee’s acceptance shall be payable to the first trustee who is not the settlor of the trust; and

(B) One per cent based upon the gross fair market value of the trust assets of the trust created under the revocable living or administrative trust on the date of the trustee’s acceptance shall be payable to the first trustee of any trust created under a revocable living trust after the settlor’s death or other administrative trust; provided that the trustee shall not also be the trustee of the revocable living trust or administrative trust that is the source of funding for the newly-created trust;

(2) Annual Compensation:

(A) Upon all moneys and other property received in the nature of revenue or income of the trust, such as rents, interest, dividends, and general profits, five per cent of the income received during the year shall be payable to the trustee, and paid not more than once per quarter;

(B) Upon the principal trust, the trustee shall be compensated no more than once per quarter, based on the following:

(i) One-half of one per cent of the first $5,000,000;

(ii) One-third of one per cent of the next $3,000,000;

(iii) One-fifth of one per cent of the next $2,000,000; and

(iv) One-tenth of one per cent of assets in excess of $10,000,000,

based upon the gross fair market value of the principal assets as of the first day of the trust’s fiscal year; and

(3) Compensation Upon Termination of the Trust:

One per cent based upon the gross fair market value of the trust assets as of the termination date of the trust pursuant to the terms of the trust, shall be payable to the trustee at any time after the termination date, up to and including the date the trust assets are finally distributed; and

(4) Compensation for Special Services:

Further compensation may be made as the court deems just and reasonable for services performed in connection with assuming the trusteeship, sales or leases of real estate, contested or litigated claims against the estate, the adjustment and payment of extensive or complicated estate or inheritance taxes, the preparation of estate and income tax returns, the carrying on of the decedent’s business pursuant to an order of court or under the provisions of any will, litigation in regard to the property of the estate, and such other special services as may be necessary for the trustee to perform, prosecute, or defend; provided that if all of the beneficiaries agree to the trustee’s compensation for special services, then court approval shall not be required;

provided that if more than one individual serves as trustee, then the compensation due pursuant to paragraphs (1), (2), and (3), as applicable, shall be divided equally between the then-acting trustees, unless otherwise agreed by the trustees. If one or more individuals are serving as trustees with a bank or trust company, then the individual trustees shall be entitled to fifty per cent of the compensation due pursuant to paragraphs (1), (2), and (3), as applicable, which shall be divided among the then-serving individual trustees as they may agree. An individual who in the ordinary course of business serves as a fiduciary, serving together with one or more individuals as trustees, or a bank or trust company serving together with one or more individuals as trustees, shall be entitled to the compensation described in subsection (b).

(d) For purposes of any agreement between the trustee and the beneficiaries regarding the trustee’s compensation, the agreement shall be binding upon incapacitated, minor, unborn, and unascertained beneficiaries if the applicable provisions of section 560:1-403(2)(B) and © are satisfied.

(e) The following terms, or comparable language in the provisions of a trust, unless otherwise limited or modified, authorize compensation to the trustee under this section: “reasonable compensation”, “compensation in accordance with applicable law”, “compensation”, “reasonable compensation commensurate with the services performed”, and “statutory compensation”.

(f) This section shall apply to future accounting periods of existing trusts as well as to new trusts. This section shall not apply to charitable trusts. [RL 1935, pt of §3793; am L 1935, c 124, §1; am L 1943, c 88, §1 and c 149, §1; RL 1945, §9757; am L 1947, c 100, §1; am L 1951, c 170, §1; RL 1955, §219-17; am L 1959, c 169, §1; HRS §607-18; am L 1976, c 200, pt of §1; am L 1988, c 362, §1; am L 1992, c 85, §1; am L 1993, c 34, §2; am L 2014, c 212, §2; am L 2015, c 133, §1]

Cross References

Guardians, see §§560:5-209 and 560:5-312.

Personal representatives, see §§560:3-719 to 560:3-721.

Trustees, see §560:7-205.

Law Journals and Reviews

Trustee Fees Under the Hawaii Probate Code: Can the Court Approve Trustee Fee Schedules? 10 HBJ, no. 13, at 121 (2007).

Case Notes

Generally.

Based on the plain language of and legislative history underlying §560:7-205, courts may review the reasonableness of a trustee’s determination as to what constitutes “income”; trustee’s determination that property tax payments were “income” was reasonable. 104 H. 267, 88 P.3d 202 (2004).

Appraised value.

33 H. 226 (1934). Disallowance of because of neglect of duties. 8 H. 472 (1892); 9 H. 512 (1894); 11 H. 420 (1898); 11 H. 495 (1898); 13 H. 202 (1900); 13 H. 242 (1901); 13 H. 388 (1901); 13 H. 630 (1901); 14 H. 443 (1902); 17 H. 517 (1906); 18 H. 542 (1908); 26 H. 243, 247 (1922); 28 H. 590, 598 (1925). Administrator under former statute. 9 H. 453 (1894). Dishonesty. 33 H. 445 (1935).

Commissions.

Trustee should be allowed reasonable compensation for trustee’s time and trouble. 5 H. 196 (1884). Trustees entitled to same fees as executors, administrators and guardians. 24 H. 414 (1918); 27 H. 780, 783 (1924); 28 H. 329 (1925); 31 H. 78 (1929). Of guardian. 7 H. 368 (1888). On principal collections. 16 H. 512 (1905). On final payment. 16 H. 512 (1905); 29 H. 169 (1926); cf. 25 H. 121 (1919) (investment of money representing capital); 27 H. 736 (1924) (effected by exchange of receipts); cf. 16 H. 159 (1904). On income from capital assets into which final payments have been previously converted. 37 H. 111 (1945). On money realized. 13 H. 317 (1901). On new loan or exchange of securities. 16 H. 512 (1905). On chattels transferred in kind. 3 H. 288 (1871); 16 H. 159 (1904). Whether paid out of corpus or income. 23 H. 335 (1916). Whether taxes paid by lessee are income. 28 H. 502 (1925). Death before completion of administration. 3 H. 178 (1869). Statutory fees and compensation under will mutually exclusive. 3 H. 384 (1872). Computation. 37 H. 111 (1945). Not allowed on co-owner and beneficiary savings bonds. 39 H. 76 (1951). Trustees accepting settlor’s nomination are bound by settlor’s compensation and not entitled to statutory compensation; successor trustee appointed by court, entitled to statutory rates. 51 H. 548, 465 P.2d 996 (1970).

Executors and administrators.

Legal expenses, of. 3 H. 522 (1874); 26 H. 243 (1922). Expense of establishing contested will. 16 H. 575 (1905). Expenses of contestant. 26 H. 337 (1922). Double commissions. 33 H. 666 (1936). Counsel fees disallowed for legal services performed when neither necessary nor for benefit of the estate. 37 H. 447 (1947). For professional services rendered by the

attorney for the executor not legal but purely executorial, no allowance. 37 H. 447 (1947).

Further allowances.

Realtor. 27 H. 780, 790 (1924). Stockbroker. 24 H. 414 (1918). Attorney. 11 H. 204 (1897); 15 H. 394 (1904). Not if services unnecessary. 27 H. 343, 353 (1923); 27 H. 439 (1923). Or if within ordinary duties. 27 H. 343, 351 (1923). Neglect of duties effect on commissions. 14 H. 443 (1902); 17 H. 517 (1906); 26 H. 243, 274 (1922); 26 H. 774 (1923); 27 H. 343 (1923); 28 H. 590, 684 (1925); 32 H. 943 (1934); 26 F.2d 609 (1928); 31 F.2d 553 (1929). No reduction under particular circumstances. 26 H. 774 (1923). Attorney’s fees to defend action to recover excessive trustee commissions denied. 51 H. 548, 465 P.2d 996 (1970).

Masters.

33 H. 220 (1934); 36 H. 728 (1944).

Trustees.

Additional compensation. 24 H. 414, 418 (1918) (special or professional services); 27 H. 780 (1924) (services as realtor). Costs, expenses and attorney’s fees. 23 H. 694 (1917) (proceeding for benefit of estate); 25 H. 786 (1921) (litigation of interest of beneficiaries); 24 H. 573 (1918) (construction of will); 24 H. 573 (1918) (suit by other than trustee); 23 H. 245 (1916) (of unsuccessful claimant to trust estate); right of appeal. 25 H. 786 (1921). Employment of realtor. 29 H. 169 (1926). Administrative expenses. 34 H. 417 (1937), questioned on other grounds. 36 H. 403, 440 (1943). See also 36 H. 518 (1943); 36 H. 631 (1944); 36 H. 686 (1944). Trustees; effect of breach of trust on right to commissions. 47 H. 548, 393 P.2d 96 (1964); 47 H. 629, 394 P.2d 432 (1964).

Cited: 234 F.2d 221, 226, 227 (1956); 33 H. 666, 671 (1936).