A client’s daughter, recently named successor trustee for her father’s trust, called me last week. She was spending nearly twenty hours a week managing his Manhattan apartment sale, coordinating with accountants, and fielding calls from anxious beneficiaries. “I’m doing more than I did at my last job,” she said. “Am I supposed to be doing this for free?”
It’s a question we hear often. The person who creates a trust—the grantor—places immense faith in the trustee they name to manage it. This role is not merely administrative. It is a position of profound legal and ethical responsibility, and it is almost always compensated for the work required.
A trustee’s pay is governed by a strict hierarchy of rules, beginning with the trust document itself and falling back on New York law when the document is silent.
Trustee vs. Executor: A Critical Distinction
First, we must clarify a common point of confusion. People often use the terms “trustee” and “executor” interchangeably. Legally, they are distinct roles.
- An Executor is appointed in a Will to administer an estate through the Surrogate’s Court probate process.
- A Trustee is appointed in a Trust agreement to manage the assets held by that trust, often entirely outside of court supervision.
While both are fiduciaries—meaning they have a duty to act in the best interests of others—their compensation is governed by different rules. An executor’s commissions are set by statute and approved by a judge. A trustee’s compensation depends first on the language of the trust document.
How Trustee Compensation Is Determined
In my practice, I advise both grantors creating trusts and trustees stepping in to manage them. For both, understanding compensation is key to a smooth administration. In New York, the method for determining a trustee’s pay follows a clear order.
1. The Trust Document Is Sovereign
The trust agreement itself is the single most important factor. A well-drafted trust should include a specific provision outlining trustee compensation. The grantor can set a flat annual fee, an hourly rate, or a percentage of the assets under management. They can also state that a trustee, particularly a family member, should serve without compensation.
When the trust document provides a specific method, that method controls. It supersedes any default state law. This is why deliberate planning is so important; it allows the grantor to define the terms, rather than leaving it to a statutory formula that may not fit the family’s circumstances.
2. When the Trust Is Silent: New York Statutory Commissions
If the trust document doesn’t mention compensation, New York law provides a default fee schedule. For most modern trusts, the relevant statute is Section 2312 of the Surrogate’s Court Procedure Act (SCPA), which outlines annual commissions.
Under SCPA § 2312, a trustee is entitled to an annual commission calculated as a percentage of the principal value of the trust assets:
- 1.05% on the first $400,000
- 0.45% on the next $600,000
- 0.30% on all assets above $1,000,000
The trustee is also entitled to a commission of 6% on the income collected and paid out each year. This formula provides a predictable framework, but it underscores why a thoughtfully drafted trust is superior. For very large or very small trusts, this default may not align with the grantor’s original intent.
The Fee Is Earned: The Weight of Fiduciary Duty
Trustee compensation is not a gift. It is payment for accepting the significant legal burden the trustee accepts. A trustee is a fiduciary, held to one of the highest standards of care under the law. They have a duty of loyalty, a duty of prudence in investing, and a duty of impartiality among beneficiaries.
If a trustee makes a mistake—such as making an improper investment or favoring one beneficiary over another—they can be held personally liable for financial losses. This role should not be taken lightly. The commission reflects the skill, diligence, and risk required for the proper stewardship of another family’s legacy.
For family members serving as trustee, deciding whether to accept a fee can be a delicate matter. Taking a commission is taxable income and can sometimes create tension. In other situations, refusing compensation for hundreds of hours of work is not feasible. The best approach is an open conversation and a deliberate decision, documented for the trust’s records.
The role of a trustee is one of service and integrity. Whether that service is compensated by a fee specified in the trust or a default statutory commission, the underlying responsibility remains the same: to carry out the grantor’s wishes with diligence and care.
If you are drafting a trust or have been asked to serve as a trustee, the first step is a careful review of the document’s compensation clause. At our firm, we often begin by analyzing this specific language to ensure all parties understand their rights and obligations from the start.
