Your brother named you successor trustee for his children’s trust. You were honored. But as you step into the role, you realize the responsibility is immense—managing investments, making distributions, filing taxes, and communicating with beneficiaries. It’s a significant commitment of time and expertise. This raises a practical question: are you supposed to get paid for this work?
I see this situation frequently. A family member is named as a fiduciary, and compensation is either an afterthought or avoided entirely. But being a trustee is not a ceremonial title; it is a job with serious legal duties and potential personal liability. Compensation is not about profiting from a family member’s legacy—it is about recognizing the work required to be a faithful steward of that legacy.
The Trust Document Is the First Authority
Before looking to state law, we always look first to the trust document. The grantor—the person who created the trust—has the right to specify how, or if, the trustee should be paid. A well-drafted trust addresses this directly.
We see a few common approaches:
- A Fixed Fee: The trust might state a specific annual amount, like $10,000 per year.
- An Hourly Rate: This is less common for individual trustees but can be used, allowing the trustee to bill the trust for their time.
- A Percentage of Assets: The trust might direct the trustee to be paid a certain percentage of the trust’s assets under management each year.
- “Reasonable Compensation”: Many trusts simply state the trustee is entitled to “reasonable compensation.” This provides flexibility but can also lead to ambiguity and disputes if beneficiaries disagree on what is “reasonable.”
When the grantor’s wishes are clear, those instructions override default state rules. The grantor’s intent is paramount. A trustee’s role is to execute that intent, and the compensation clause ensures the trustee is fairly treated for doing so.
When the Trust Is Silent: New York’s Statutory Commissions
When a trust document says nothing about compensation, New York law provides a backstop. A specific statute outlines a default commission schedule for trustees. This is not a suggestion; it is a formula baked into the law.
Under Surrogate’s Court Procedure Act (SCPA) § 2309, trustees are entitled to annual commissions calculated as a percentage of the trust principal. The rates are tiered:
- $10.50 per $1,000 on the first $400,000 of principal (1.05%)
- $4.50 per $1,000 on the next $600,000 of principal (0.45%)
- $3.00 per $1,000 on all principal above $1,000,000 (0.30%)
A trustee is also entitled to an annual commission of 1% on income they collect and pay out. This statutory formula provides a clear, if rigid, method for calculating fees and prevents disputes by creating a predictable standard. For a high-value but simple-to-administer trust in Manhattan, the statutory fee might feel excessive. For a lower-value trust with complex assets and difficult beneficiaries, it might feel inadequate. This is why addressing compensation in the trust document is the prudent course.
The Burden of Fiduciary Duty
Whether compensation is set by the trust or by state law, it reflects the significant responsibility a trustee undertakes. A trustee is a fiduciary, which is the highest standard of care under the law. You have a legal duty to act with undivided loyalty to the beneficiaries, to be prudent in your investments, and to account for every dollar.
This is not a passive role. It involves tangible work:
- Safeguarding and investing trust assets.
- Maintaining detailed financial records.
- Filing annual fiduciary income tax returns.
- Making discretionary decisions about distributions.
- Communicating clearly and transparently with all beneficiaries.
If a trustee makes a mistake—even an honest one—they can be held personally liable for any financial loss to the trust. The fee earned is not just for the hours worked; it is for the professional-level stewardship and risk assumed. Many family members waive their fee, a perfectly valid personal decision. But no one should be expected to take on this level of legal and financial responsibility without the right to be compensated for their labor and liability.
The most prudent approach is to decide these matters at the planning stage. Leaving compensation to a default state statute or a vague “reasonableness” standard can create friction among family members. Defining the terms of the job, including pay, is an act of clarity and care. If you are creating a trust, discuss trustee compensation with your attorney. Including a specific, unambiguous clause in the document ensures your chosen steward can focus on their duty, not on defending their right to be paid for it.
