I often sit down with clients who have chosen a sibling or a close friend to serve as the trustee for their children’s inheritance. It is an act of deep trust. But it is often accompanied by a quiet assumption that this person will perform the role for free, as a favor. The reality is that serving as a trustee is a demanding job with significant legal responsibility, and New York law establishes a clear right to compensation.
Expecting a loved one to manage investments, handle distributions, file tax returns, and face potential liability without payment is a heavy burden. It can strain relationships and lead to resentment. Worse, an uncompensated trustee may neglect their duties—a situation that helps no one, especially the beneficiaries.
The Fiduciary Duty and The Right to Compensation
When you name someone as a trustee, you appoint them to a fiduciary role. This is one of the highest standards of care under the law. A trustee has a legal duty to act prudently and exclusively in the best interests of the beneficiaries. This is not a casual role—it involves complex financial management, meticulous record-keeping, and handling the delicate dynamics of the family the trust was built to protect.
Because the role demands such diligence and carries personal liability, the law provides a default payment structure. This is not about greed; it is about professionalism. Compensation encourages the trustee to dedicate the necessary time and attention to their duties. It formalizes the relationship and underscores the gravity of their stewardship. Whether your trustee is your brother in Brooklyn or a corporate trust company, they are entitled to be paid for their work.
New York’s Statutory Commission Rates
How is that payment calculated? For most trusts, the answer is found directly in the New York Surrogate’s Court Procedure Act (SCPA). The law provides a formula unless the trust document itself specifies a different arrangement.
Specifically, SCPA § 2309 sets the annual commissions for trustees. The calculation is based on the principal value of the trust assets under management. The rates are tiered:
- 1.0% on the first $400,000 of principal
- 0.45% on the next $600,000 of principal
- 0.3% on all principal amounts above $1,000,000
For example, on a trust with a principal of $2 million, the trustee’s annual commission is calculated in these brackets—it is not a flat 0.3% on the entire amount. This statutory formula provides a predictable and objective standard. It removes the need for guesswork or uncomfortable negotiations between the trustee and the beneficiaries. The law simply states what is considered reasonable compensation.
The statute also allows for an additional commission based on income collected and paid out, but the commission on principal is the core of the compensation structure. When we draft trusts, we have a deliberate conversation about this. Do we want the state’s default rules to apply, or does the client’s specific situation call for a different approach?
Drafting for Intentional Compensation
While the SCPA provides a default, the creator of the trust—the grantor—has the power to set their own terms for trustee compensation. The trust document is the ultimate authority. You can specify a flat annual fee, an hourly rate, or even state that the trustee must serve without compensation.
Each choice has consequences. A flat fee might be simple, but it may not adequately compensate a trustee if the trust becomes unexpectedly complex or litigious. An hourly rate requires meticulous time tracking and can lead to disputes. Waiving compensation entirely may seem like a way to preserve trust assets, but it can make it very difficult to find someone willing to serve—especially a professional or corporate trustee—if the family member you named is unable or unwilling to act.
This decision is a critical part of the planning process. It is an opportunity to be intentional about the future administration of your legacy. Thinking through the trustee’s duties and providing for fair compensation is an act of foresight that protects both the trustee and the beneficiaries they serve.
The role of a trustee is too important to be treated as an afterthought. Understanding how a trustee is paid—and deciding whether the statutory default or a custom structure is right for your family—is fundamental to creating a plan that works not just on paper, but for the generation that follows.
If you are in the process of creating a trust or have been asked to serve as a trustee, the first step is to clarify the duties and the compensation involved. We routinely schedule consultations to review the fiduciary responsibilities outlined in a trust document and model the potential administrative costs over the life of the trust.
