Trusts & Estates Litigation Consulting & Expert Witness Testimony
Judge rules on reasonable trustee fees in the matter of Robert Rauschenberg Trust in the amount of $24,600,000.
In June 2014 in the Circuit Court of the Florida 12 Judicial District (Lee County) Probate Division Case File No. 08-CP–2479. Judge Rosman presiding heard the case to determine reasonable trustee fees in the matter of the Robert Rauschenberg trust.
Robert Rauschenberg, one of the world’s most important pop artists of the 20th century, www.RauschenbergFoundation.org died in May 2008.
I was engaged as an expert witness by Foley and Lardner in Orlando, Florida, the attorneys representing the co-trustees of the Robert Rauschenberg Trust, to opine on reasonable trustees’ fees. My review of the case file determined a gross estate value of $605,645,595 as of the date of death plus an additional $313 million in intellectual property not listed originally on the 706. The trust property consisted of over 7600 individual pieces of art, over 1100 photographs, extensive real estate holdings on Captiva Island, Florida, as well as securities, life insurance policies, and cash. After four years of administration, the trustees distributed to the beneficiary trust assets valued at between $2.041 billion and $2.283 billion.
Mr. Rauschenberg appointed three trustees to administer the trust after his death. Each of the trustees possess unique and special knowledge and experience to successfully administer the trust estate, which held an extensive body of artwork for the benefit of the beneficiaries. Each of the trustees had working knowledge of the art market at the highest levels, and executed a strategy that preserved and grew the value of the trust assets during the four years of administration that included the turbulent GFC (Global Financial Crisis) of 2008-2009. Each of the trustees had knowledge of other noted artists estates that had experienced significant deterioration in their value of estate assets. The trustees had a good working relationship with the beneficiary (the Rauschenberg Foundation) during the administration with one exception – the issue of what constituted reasonable compensation for the trustees’ services. The trustees petitioned the court for $60 million in trustee fees, and the beneficiary foundation opposed the petition, countering that a fractional amount of what the trustees requested would be more appropriate.
In Florida, when an irrevocable trust is silent on the issue of trustee fees and the trustees and beneficiary cannot come to an agreement as to what constitutes reasonable compensation for the trustee services, the parties petition the court to rule on reasonable compensation. In this case, the venue was the Circuit Court Probate Division in Lee County, Florida. The court held a five-day hearing and received evidence from the trustees and beneficiaries and testimony from the parties’ respective experts.
In determining reasonable trustee compensation, Florida statute and case law rely primarily on Florida statute 736.0708 and the 1958 Supreme Court of Florida case West Coast Hospital Association v. Florida National Bank.
West Coast Hospital Association v. Florida National Bank case law defines 11 factors to be considered in determining reasonable compensation for trustees: the amount of capital and income received and distributed by the trustee, wages or salaries customarily granted to agents or servants performing similar work, success or failure of the administration of the trust, unusual skills or expertise which the trustee in question may have provided, the fidelity or lack thereof displayed by the trustee, the risk and responsibility assumed by the trustee, the time commitment required, the custom in the community as to allowances to trustees by settlers or courts and as to charges exacted by trust companies and banks, the character of the work done in the course of the administration whether routine or involving skill and judgment, any estimate which the trustee has given for the value of their services, and payments made to the trustee and intended to be applied towards the compensation.
After carefully reviewing all the documents provided to me by engaging counsel, analyzing and considering the 11 factors of the West Coast opinion above, and applying my years of experience as a senior officer in trust banking in Florida, I wrote an expert report for the court, was deposed by opposing counsel, and testified at trial as to reasonable trustee fees in the case.