A family in Brooklyn recently came to my office, concerned about the trust their late mother had established. She had named a large bank as the corporate trustee. For two years, things seemed fine. Then, the beneficiaries started noticing significant fees being deducted from the trust principal—fees they couldn’t decipher from the bank’s generic statements. They felt powerless, unsure if these costs were standard or excessive. Their story highlights a critical question: how is the person or institution managing your legacy compensated?
A Trustee’s Job Is Not a Favor
A trustee is a fiduciary—the highest standard of care under the law. This is not an honorary title. It is a demanding job with significant responsibilities and personal liability. A trustee manages assets, makes prudent investment decisions, accounts to beneficiaries, files tax returns, and distributes funds according to the trust document.
I stress this point when I work with clients selecting a trustee. Whether you appoint a family member or a corporate entity, you are hiring them for a professional role. They are legally obligated to act in the best interests of the beneficiaries. If they breach that duty, they can be held personally responsible for any losses. This risk and workload demand compensation. It is necessary to attract a competent and diligent steward for your assets.
The core principle is stewardship. The fees a trustee earns are for the work of protecting and growing the assets entrusted to them, ensuring your legacy is managed as you intended. Problems arise not from the existence of fees, but from a lack of transparency about how they are calculated.
The Statutory Guideline for Trustee Commissions
New York law provides a default fee schedule for trustees if the trust document itself is silent on compensation. These rules are laid out in the Surrogate’s Court Procedure Act (SCPA) § 2309, which establishes a commission structure based on the value of the assets under management.
The statutory commission is calculated in two primary ways:
- Paying and Receiving Commissions: A trustee is entitled to a one-time commission of 1% on all principal assets they receive into the trust and another 1% on all principal they pay out. This compensates for the work of marshaling assets and making final distributions.
- Annual Commissions: Each year, the trustee is paid a commission based on the value of the trust principal. This is calculated on a tiered 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.
This statutory formula provides a clear, predictable framework. It prevents a trustee from unilaterally setting their own fee and gives beneficiaries a basis for evaluating charges against the trust. It is the baseline the Surrogate’s Court uses to determine “reasonable” compensation.
Corporate Trustees vs. Individual Trustees
The statutory rates are a default, not the only option. The type of trustee you choose often influences the fee structure.
An individual trustee—a sibling, an adult child, or a family attorney—may choose to accept the statutory commission. A family member might agree to serve for a lower fee or waive compensation entirely, though I generally advise against this. Waiving a fee can lead to the trustee treating the role with less formality, which is a disservice to the beneficiaries. A formal fee reinforces the professional nature of the fiduciary duty.
A corporate trustee—a bank or trust company—will almost never use the statutory formula. Instead, they have their own published fee schedules, typically based on a percentage of the assets under management and often with a minimum annual fee. While their fees may be higher than the statutory rate, a corporate trustee offers institutional expertise, regulatory oversight, and continuity that an individual cannot. Their fees cover investment management, accounting, and administrative teams.
The choice is not just about cost. It’s about matching the complexity of your estate and the needs of your beneficiaries with the right kind of steward.
Defining Compensation in Your Trust Document
The most effective way to avoid confusion and future conflict is to be deliberate. As the creator of the trust, you have the power to define how your trustee will be compensated. Your trust document can—and should—address this topic directly.
You can specify a fixed annual fee, an hourly rate, or state that the trustee shall be paid the statutory commission as defined by New York law. You can also direct that the trustee’s compensation shall be “reasonable,” which defaults to the statutory rates unless a different agreement is reached. By including specific language, you provide clarity for your trustee and your beneficiaries. It transforms a potential point of contention into a settled term of service.
This is a key part of the planning process we undertake with our clients. We discuss the expected workload, the nature of the assets, and family dynamics to craft a compensation clause that is fair and encourages the diligent stewardship your legacy deserves.
If you are serving as a trustee or have been named as one, understanding your duties and your right to compensation is critical. We schedule private consultations to review trust instruments and clarify the fiduciary responsibilities a trustee must uphold.
