I often see trusts create friction where they were meant to create harmony. Consider two adult children in Manhattan named as co-trustees for their parents’ estate. One sibling meticulously manages the trust’s investments and real estate portfolio, spending hours each week on the phone with accountants and brokers. The other simply signs off on distributions. When it comes time to take a fee, the first sibling believes they are entitled to a significant commission, while the second argues they should both take the same amount—or nothing at all. A tool designed for stewardship becomes a source of family discord.
The question of trustee compensation is not a matter of opinion or guesswork. It is a matter of law, prudence, and—most importantly—the explicit instructions left by the person who created the trust. Understanding how these fees are determined is critical for anyone who creates a trust, and for anyone who accepts the profound responsibility of serving as a trustee.
The Default Rule: New York’s Statutory Commissions
When a trust document is silent on compensation, New York law provides a default. The Surrogate’s Court Procedure Act (SCPA) outlines the annual commissions a trustee is entitled to take, calculated directly from the value of the trust principal.
Specifically, SCPA § 2309 sets a tiered annual commission schedule:
- $10.50 per $1,000 on the first $400,000 of principal.
- $4.50 per $1,000 on the next $600,000 of principal.
- $3.00 per $1,000 on all principal above $1,000,000.
A trustee is also entitled to commissions on income the trust generates and distributes. This statutory rate is the baseline—a predictable method for compensation when a grantor is silent. Serving as a trustee is not a passive role. It is an active, demanding job with significant legal liability. The trustee is a fiduciary. That duty comes with a right to compensation for the work and risk involved.
When the Trust Document Speaks
The most important voice is the grantor’s—the person who created the trust. A prudent trust instrument always addresses trustee compensation directly. This is where intention becomes instruction.
The grantor has complete authority to override the statutory commissions set by the SCPA. They can dictate a different arrangement entirely:
- A Fixed Annual Fee: The trust might state that the trustee receives a flat fee of $10,000 per year, regardless of the trust’s value.
- An Hourly Rate: This is less common but can be used if the workload is expected to be inconsistent.
- No Compensation: A grantor may name a close family member and explicitly state that they are to serve without commission, particularly if that person is also a major beneficiary.
- Corporate Trustee Schedules: If a bank or trust company is named, the trust document will often incorporate that institution’s standard fee schedule by reference.
Clarity is paramount. Ambiguous language like “the trustee shall receive reasonable compensation” invites a dispute in Surrogate’s Court to define “reasonable.” Our work is to define these terms with precision, reflecting the grantor’s wishes and preventing disputes between beneficiaries and fiduciaries.
Individual vs. Corporate Trustees
The choice between an individual trustee—like a family member or trusted friend—and a corporate trustee has significant implications for compensation. A corporate trustee is a professional entity. They bring a team, institutional investment knowledge, and established processes for accounting and tax compliance. Their fees reflect this infrastructure and are typically charged as a percentage of assets under management.
An individual trustee might be just as capable, but the dynamic is different. They might agree to serve for a lower fee than the statutory rate, or for no fee at all. However, it is a mistake to assume a family member should work for free. The role of a trustee is demanding. It involves managing investments, filing tax returns, making difficult distribution decisions, and keeping meticulous records to account for every dollar. It is a job. Compensating an individual for this work is not just fair—it’s a prudent practice that formalizes the role and encourages diligence.
The role of a trustee is one of immense responsibility. It is stewardship of a legacy. Whether that steward is a corporate entity or a sibling, their compensation must be defined from the outset, grounded in law and the grantor’s deliberate intentions.
If you are creating a trust or have been asked to serve as a trustee, the compensation clause is one of the most important provisions to get right. We can review your proposed trust document to ensure the language governing trustee fees is unambiguous and aligns with your family’s goals.
