A client recently came to our Manhattan office with a trust accounting from her late father’s estate. Her uncle, named as trustee, had paid himself a significant five-figure fee. “Can he just decide to pay himself this much?” she asked. The answer depends on the trust document and, failing that, on New York law. A trustee holds a position of immense responsibility—a fiduciary duty—and their compensation must reflect that without unfairly diminishing the assets intended for beneficiaries.
The Statutory Default: How New York Law Calculates Commissions
If a trust document is silent on compensation, New York law provides a default schedule. The Surrogate’s Court Procedure Act (SCPA) § 2309 outlines a tiered system based on the value of the trust principal. This is not an arbitrary number; it is a specific calculation.
The annual commissions are calculated as follows:
- $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 an annual commission of 1% on trust income they collect and pay out. This statutory framework provides a clear baseline, preventing a trustee from inventing a fee. If multiple trustees are serving, they must share a single commission. However, if the trust principal is between $100,000 and $400,000, two trustees may each receive a full commission. If the principal exceeds $400,000, up to three trustees may each receive a full commission.
When the Trust Document Sets the Rules
The creator of a trust—the grantor—has the final say. An intentionally drafted trust document can and often does override the statutory default. A grantor might specify a different arrangement that better suits the family’s needs or the nature of the trust assets.
For instance, a grantor might:
- Set a flat annual fee. This is common when the workload is predictable.
- Specify an hourly rate. This can be appropriate for a professional trustee, like an accountant or attorney, whose work is more project-based.
- State that the trustee must serve without compensation. This is often seen when a close family member is chosen and the grantor feels the role is one of familial duty, not employment.
When we draft trusts, this is a critical point of discussion. Choosing a trustee is about finding a custodian for your legacy. Deciding how—or if—they are paid is part of that deliberate planning process. The language in the trust instrument is the primary guide, and Surrogate’s Court will uphold the grantor’s stated intentions.
The Standard of “Reasonable Compensation”
What happens if the trust document simply states the trustee is entitled to “reasonable compensation”? This is where disputes arise. “Reasonable” is not defined by a formula. Instead, a court looks at several factors to determine if a fee is justifiable.
These factors include the size and complexity of the trust, the skill and experience required of the trustee, the time and labor expended, and the overall success of the trust’s administration. Managing a trust that holds a single brokerage account is far less work than one containing an active business and commercial real estate. The compensation should reflect that reality.
Corporate trustees, such as a bank’s trust department, have a published fee schedule. Individual trustees do not, which makes meticulous record-keeping essential. A trustee who pays themselves a “reasonable” fee must be prepared to justify it to the beneficiaries and, if necessary, to a judge. This requires detailed logs of time spent and actions taken. Stewardship. That is the core of the trustee’s role, and transparent compensation is a key part of upholding that duty.
For beneficiaries questioning a trustee’s fee or trustees seeking to confirm their duties, the first step is a formal review of the trust instrument against the standards of New York law.
