A nephew in Brooklyn is named trustee of his late aunt’s million-dollar trust. He’s honored, but also overwhelmed. He’s spending weekends fielding calls from beneficiaries, paying trust bills, and working with an accountant on the trust’s investments. He starts to wonder—is he supposed to be compensated for this work? And if so, how much is fair?
This is a common question that lands on my desk. Many people named as trustees, especially family members, view the role as a duty or an honor. It is. But it is also a significant legal and financial responsibility. A trustee is a fiduciary, with a legal obligation to act in the best interests of the beneficiaries. This work requires time, diligence, and expertise. For that, the law recognizes that trustees deserve reasonable compensation.
The Statutory Default for Trustee Commissions
When a trust document is silent on compensation, New York law provides a default formula. The legislature did not want to leave this to guesswork or family arguments. Instead, the Surrogate’s Court Procedure Act (SCPA) sets out a specific schedule for calculating annual commissions. For most trusts, this is governed by SCPA § 2309.
This statute creates a tiered system based on the value of the trust principal—the assets held by the trust. The annual commissions are calculated as follows:
- 1.0% on the first $400,000 of principal.
- 0.5% on the next $600,000 of principal.
- 0.3% on all principal amounts above $1,000,000.
For the nephew managing his aunt’s $1 million trust, the calculation is straightforward. He would be entitled to $4,000 on the first $400,000 and $3,000 on the next $600,000, for a total annual commission of $7,000. This is not an arbitrary number—it is the rate deemed reasonable by state law for the stewardship of those assets. The law also allows a commission on income collected and paid out, compensating the active, ongoing management a trustee must perform.
When a trust has multiple trustees, they must share a single commission unless the trust principal is $100,000 or more. If the principal exceeds that amount, each trustee—up to a maximum of three—may be entitled to a full commission.
When the Trust Document Sets the Terms
The statutory formula is a backstop—a default rule for when the creator of the trust, the grantor, does not specify otherwise. In my practice, I often advise clients to be deliberate about trustee compensation when we draft the trust itself. A well-drafted trust addresses fees directly.
Why override the state’s formula? The trust’s assets might be unusually complex—perhaps it holds a family business, a commercial property in Manhattan, or a collection of valuable art. These assets require far more active management than a simple portfolio of stocks and bonds. In such cases, a grantor might specify a higher fee or an hourly rate to attract and retain a skilled trustee capable of that stewardship.
Conversely, a grantor might choose to set a lower fee. If the trustee is a close family member who is also a beneficiary, the grantor might decide a smaller commission is appropriate. The key is intentionality. By defining the compensation in the trust document, you remove ambiguity and reduce the potential for future disputes between the trustee and the beneficiaries. It transforms a potential point of conflict into a clear term of service.
Individual vs. Corporate Trustees
The conversation about fees often changes when considering a corporate trustee, such as a bank or a trust company. While an individual trustee—like our nephew in Brooklyn—is typically compensated based on the statutory rate or the trust’s specific terms, a corporate trustee operates differently.
Corporate trustees have their own published fee schedules, which are often higher than the statutory commissions. This is not surprising—you are paying for an entire institution’s infrastructure, expertise, and regulatory oversight. For larger or more complex trusts, the services of a corporate trustee can be invaluable. They provide a level of impartiality and professional management that is difficult for an individual to replicate.
The choice between an individual and a corporate trustee is a critical part of the planning process. It’s a decision that balances cost, expertise, and the personal dynamics of the family. The “right” answer depends entirely on the family’s goals, the nature of the assets, and the legacy they wish to build.
Understanding trustee fees is not just an administrative detail. It is about recognizing the value of stewardship and ensuring the person or institution tasked with protecting your legacy is properly equipped and motivated to do so. Whether you are creating a trust or have been asked to serve as a trustee, clarity on this point is essential.
If you are designing your estate plan or have been named a trustee, the terms of compensation must be clear. Schedule a consultation, and we will review the trust documents to align the fee structure with your intentions and the duties involved.
