GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1989

S	2 

SENATE BILL 836
Judiciary III Committee Substitute Adopted 5/4/89

Short Title:  Simplify Fiduciary Compensation.	(Public)
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Sponsors:
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Referred to:  
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April 11, 1989

A BILL TO BE ENTITLED
AN ACT TO SIMPLIFY THE COMPUTATION OF FIDUCIARY COMPENSATION.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 32-50 reads as rewritten:
"§ 32-50. Compensation.
(a)	Express Trust in Writing. – Unless otherwise provided in the instrument creating the trust relationship, and except as provided in subsection (b) of this section, a trustee under an express trust in writing, either inter vivos or testamentary, shall receive compensation for serving as a trustee as follows:
													(1)	Ordinary Compensation.
a.	Income Compensation. - An annual charge on gross income of:
1.	Five percent (5%) on the first fifteen thousand dollars ($15,000) of income; and
2.	Three percent (3%) on all income over fifteen thousand dollars ($15,000).
b.	Principal Compensation. - An annual charge on the current value of all the principal assets of the trust, including all real property, of:
1.	Five-tenths of one percent (5/10%) on the first fifty thousand dollars ($50,000) of principal;
2.	Four-tenths of one percent (4/10%) on the next fifty thousand dollars ($50,000) of principal; and
3.	One-tenth of one percent (1/10%) on all principal over one hundred thousand dollars ($100,000).
For purposes of determining the annual compensation on principal, the current value of the principal shall be determined as of the date of the first annual accounting and each year thereafter on the anniversary of that date by an appraisal of the trustee and certified  to the clerk of superior court.  The annual principal compensation may be charged in quarterly increments.  In the event that the trustee chooses to charge its compensation in quarterly increments, the trustee shall calculate the principal compensation on the basis of the current value of the principal as of the last day of the quarter, multiplying the principal compensation so calculated by twenty-five percent (25%) to prorate it to one quarter.
(2)	Extraordinary Additional Compensation. – In addition to the ordinary compensation set out in subdivision (1) above, the clerk of superior court, at the written request of the trustee, may in his discretion allow additional compensation in those cases where the trustee has rendered services beyond the routine services expected by a trustee but in no event shall the total annual aggregate compensation exceed six percent (6%) of the gross income and the expenditures made in accordance with law, and six-tenths of one percent (6/10%) upon the current value of principal, both real and personal property, held as assets of the trust.  In determining the amount of additional compensation, if any, the clerk shall consider the difficulty of the services rendered, the skill requisite to perform the services properly, the nature of the assets of the trust, the responsibility and potential liabilities assumed by the trustee in performing the services, and the resources required to perform the services.  Such additional compensation may include compensation for the services of agents or employees of the trustee and may also include reimbursement of out-of-pocket costs.
	This section is not applicable to trustees under bond issues, trustees of corporate trusts, employee benefit trusts, deeds of trusts of real property used for purposes of securing loans, or trusts for similar purposes.
(b)	Effect of Provisions in the Instrument. – Nothing in the provisions of this section shall be interpreted to prevent a corporate trustee from applying its regularly adopted schedule of compensation in effect and applicable at the time of performance of such services where the settlor or testator in the instrument creating the trust has so stipulated, has made no reference to the compensation of the trustee, or has not otherwise limited the compensation of the trustee. In those instances where there is no corporate trustee or where the compensation provision in the instrument creating the trust relationship provides that the compensation shall not exceed the maximum allowed by law, or the amount allowed by law, this shall be construed as an expression of intention that the compensation shall not exceed the maximum compensation as provided in subsection (a) of this section.
(c)	Other Fiduciary Relationships. – Unless otherwise provided, fiduciaries other than trustees under express trusts shall be entitled to compensation fixed in the discretion of the clerk of superior court not to exceed five percent (5%) upon the amounts of receipts, including the value of all personal and real property when received, and upon the expenditures made in accordance with law. In determining  the amount of such compensation, both upon the property received and upon expenditures made, the clerk of superior court shall consider the time, responsibility, trouble and skill involved in the management of such property. The clerk of superior court may allow compensation from time to time during the course of the management but the total amount allowed shall be determined on final settlement and shall not exceed the limit fixed in this subsection.
(d)	Opening Charge. – Unless otherwise provided in the instrument, a successor trustee or a trustee of a testamentary trust who did not serve as a personal representative for the estate, may impose an opening charge for his services as a trustee. The charge shall not exceed one percent (1%) of the value of the principal, both real and personal, received. Any such charge shall be in addition to the compensation allowed under subsection (a) of this section.
(e)	Closing Charge. – Unless otherwise provided in the instrument, a trustee of an express trust or other fiduciary may impose a closing charge. The charge shall not exceed one percent (1%) of the principal, both real and personal. Any such charge shall be in addition to the compensation allowed under subsection (a) of this section.
(f)	Oral Trust Agreements. – Unless otherwise provided in the oral trust agreement, a trustee under a valid oral trust agreement shall receive compensation in accordance with subsection (a).
(g)	Principal Less than Ten Thousand Dollars ($10,000). – Notwithstanding subsections (a), (b) and (c) above, when the gross value of the principal is ten thousand dollars ($10,000) or less, the  clerk of superior court is authorized and empowered to fix the compensation to be received by the trustee or fiduciary in an amount as the clerk in his discretion, deems just and adequate.
(h)	Compensation Considered Costs of Management. – All compensation, whether allocated to income or principal shall be charged as part of the costs of management and, upon allowance, may be retained out of the assets against creditors and all other persons claiming an interest.
(i)	Charges for Management; Appeals. – Nothing in this section shall be construed:
(1) 	To prevent the clerk of superior court from allowing reasonable sums for necessary charges and disbursements incurred in the management of the principal; or
(2) 	To abridge the right of any interested party to appeal an order of the clerk.
(j)	Default or Misconduct. – No fiduciary or trustee who has been guilty of default or misconduct in the due execution of his office resulting in the revocation of his appointment shall be entitled to any compensation under the provisions of this Article.
(k)	Income Tax Withholding. – For the purpose of computing the compensation whenever any portion of the dividends, interest, rents or other amounts payable to a fiduciary or trustee is required by any law of the United States or other governmental unit to be withheld for income tax purposes by the person, corporation, organization or governmental unit paying the same, the amount so withheld shall be deemed to be income.”
Sec. 2.  G.S. 32-52 reads as rewritten:
"§ 32-52. Applicability.
	The provisions of this Article shall apply to all trusts and fiduciary relationships created on or after January 1, 1990, and to all express trusts in writing existing on January 1, 1990, except that as to those express trusts in writing existing on January 1, 1990, in which the instrument makes no reference to the compensation of the trustee or has not otherwise limited the compensation of the trustee, the compensation of the trustee shall not exceed that provided in G.S. 32-50(a)(1) and (2)."
Sec. 3.  This act is effective upon ratification.