A client from Westchester recently called me. She was named trustee of her mother’s trust, set up to benefit her and her brother equally. For the past year, she had been managing the trust’s assets—a brokerage account, the family home, and a small rental property. When she paid herself a commission for her work, as the trust document allowed, her brother was furious. He accused her of taking his inheritance. We see this situation often. The dispute isn’t born of greed, but of misunderstanding a trustee’s immense responsibility and legal standing.
Serving as a trustee is not an honorary position. It is a job with serious legal obligations and personal liability. A trustee is a fiduciary, tasked with the prudent management of assets for the benefit of others. That work deserves fair compensation. What is “fair” in New York depends on what the trust document says—and what it does not.
The Statutory Default: New York’s Commission Schedule
When a trust document is silent on compensation, or if the trust was created under a will (a testamentary trust), we turn to state law. New York’s Surrogate’s Court Procedure Act provides a specific formula for calculating trustee commissions. This is not a vague guideline; it is a detailed schedule that courts enforce.
Under SCPA § 2309, an individual trustee is entitled to annual commissions based on the principal value of the trust assets they manage. The calculation is tiered:
- $10.50 for each $1,000 of the first $400,000 in principal.
- $4.50 for each $1,000 of the next $600,000 in principal.
- $3.00 for each $1,000 of principal over $1,000,000.
A trustee is also entitled to a 1% commission on all principal assets paid out of the trust. For a trust with multiple trustees, the law has further rules. If the trust principal is over $400,000, each trustee (up to three) can receive a full commission. If the principal is between $100,000 and $400,000, one full commission is divided among the co-trustees.
This statutory formula provides a clear, defensible basis for compensation. It removes the guesswork and helps prevent disputes like the one my client faced. The fee is not an arbitrary withdrawal—it is a payment for services rendered, calculated according to state law.
When the Trust Document Overrides the Statute
The person who creates a trust—the grantor—has the power to write their own rules for trustee compensation. The trust document is the ultimate authority, and its terms can override the default statutory commissions entirely. A well-drafted trust is an exercise in deliberate planning, and that includes how the trustee will be paid.
I work with clients to consider several approaches:
- A Fixed Annual Fee: This provides certainty for both the trustee and the beneficiaries. A trust might specify a flat fee of $10,000 per year, regardless of the trust’s value.
- An Hourly Rate: This can be appropriate when the trustee’s workload is uneven. The trustee must keep meticulous records of time spent on trust administration.
- Waiver of Fees: In some cases, particularly when a spouse is serving as trustee for the benefit of their children, a grantor may direct that the trustee serve without compensation.
Defining compensation in the trust instrument is one of the most effective ways to prevent future conflict. It makes the grantor’s intentions clear and leaves no room for debate among beneficiaries about what is fair. It turns a potential argument into a settled matter.
The Standard of “Reasonable Compensation”
What about living trusts that do not specify a fee but simply state the trustee is entitled to “reasonable compensation”? This term appears often, but it is subjective and can become a point of contention.
If beneficiaries challenge a trustee’s fee as unreasonable, a Surrogate’s Court judge will look at several factors. They will consider the size of the trust, the complexity of the assets, the amount of time and labor the trustee expended, and the overall performance of the trust under the trustee’s management. Managing a trust that holds a single brokerage account is far less work than managing one with commercial real estate in Manhattan, multiple business interests, and complex tax filings.
A trustee taking a “reasonable” fee must be prepared to justify it. This comes down to documentation. I advise every trustee I represent to keep a detailed log of their activities—every phone call, every decision, every hour spent on trust business. This record-keeping is the best defense against a claim that the compensation was excessive.
Compensation Is Earned Through Stewardship
A trustee’s commission is not a bonus or a distribution of inheritance. It is payment for the profound legal duty of stewardship. The trustee is legally responsible for growing and protecting the assets, making distributions, filing taxes, and communicating with beneficiaries. If they make a mistake—such as a poor investment decision or a failure to properly account for funds—they can be held personally liable.
This is a significant burden. Whether compensation is set by statute or by the trust document, it acknowledges the professional-level responsibility the trustee has undertaken. Understanding this is the first step toward resolving family disagreements over money and focusing on the true purpose of the trust: fulfilling the grantor’s legacy.
If you are creating a trust or have recently been named a trustee, the terms of compensation must be absolutely clear. The most prudent next step is to have the language in the trust instrument reviewed to ensure it reflects your intentions and minimizes the risk of a future family dispute.
