A client recently sat in my office, a successful founder who had just sold his tech company. He had spent months with us carefully structuring a trust to provide for his children and grandchildren. His final step was choosing a trustee. He was leaning toward a large, well-known bank for its stability, but the fee schedule they presented gave him pause. “A percentage of the assets, every year, forever?” he asked. “It feels like a leak in the ship I just built.”
He’s not wrong. Choosing a trustee is one of the most consequential decisions in estate planning. It’s about appointing a steward for your legacy. While an individual—a friend or family member—can serve, many families with significant assets consider a corporate trustee. They offer impartiality, professional investment management, and permanence. But that permanence has a price, and you must understand it.
The Anatomy of a Corporate Trustee’s Fees
When a bank agrees to act as a trustee, it takes on significant fiduciary duty—the highest standard of care under New York law. Its fees are compensation for this work and the risk it assumes. While every institution’s schedule is different, the charges fall into a few predictable categories.
First is the primary administrative fee, calculated as a percentage of the assets under management. This fee typically operates on a sliding scale. For example, a bank might charge 1.25% on the first $1 million, 1.0% on the next $4 million, and a lower percentage on assets above that. This annual fee covers the core duties of a trustee: accounting, record-keeping, communicating with beneficiaries, and making distributions as the trust requires.
On top of this, you will often see separate fees for asset management. If the bank’s investment division is actively managing the trust’s portfolio, they will charge for that service. This is sometimes bundled into the main administrative fee, but often it is a distinct line item. You must ask whether the stated trustee fee includes investment services or if that will be an additional cost.
Finally, look for extraordinary service fees and termination fees. Did the trust own a complex asset, like a commercial building in Brooklyn that needed to be sold? The bank may charge an additional fee for that work. Is the trust terminating and distributing its assets to a beneficiary? There will almost certainly be a fee to cover the final accounting and legal work. These are the costs that can surprise beneficiaries decades from now if they aren’t anticipated.
How New York Law Views Trustee Compensation
The fees a corporate trustee can charge are not unregulated. New York law sets the framework. While individual trustees are generally entitled to statutory commissions outlined in the Surrogate’s Court Procedure Act (SCPA), the rules for corporate trustees are different.
Specifically, SCPA § 2312 states that corporate trustees are entitled to “reasonable compensation.” The statute also says that the bank’s published fee schedule is generally considered reasonable. This gives banks significant leeway. A court will typically defer to the institution’s fee schedule unless it is proven to be unconscionable or the trustee has performed poorly.
This makes the initial selection process critical. You are not just choosing a bank; you are agreeing to a fee structure that will govern your family’s wealth for generations. The reasonableness of that fee depends on the context—the size of the trust, the complexity of the assets, and the needs of the beneficiaries. A 1% annual fee on a $2 million trust of simple stocks and bonds might be reasonable. That same percentage on a $50 million trust might be excessive, and a different arrangement should be negotiated.
The Individual vs. The Institution
After reviewing the fee schedule, many clients ask me, “Should I just name my brother instead?” It’s a fair question. An individual trustee is often less expensive and has a personal connection to the family. They understand the relationships and nuances in a way a corporate trust officer never could.
However, an individual trustee brings their own challenges. They may lack the financial expertise to manage a large portfolio. They can be influenced by family conflicts. And, of course, they will not live forever. What happens when your brother can no longer serve? Appointing an individual often just postpones the problem of succession.
A corporate trustee, by contrast, offers continuity. They have teams dedicated to tax compliance, investment strategy, and discretionary distributions. They provide an objective buffer between beneficiaries who may not always agree. The choice is not about which is universally “better”—it’s about which is the right steward for your specific goals. For some, the cost of a corporate trustee is a worthwhile investment in professionalism. For others, the personal touch of a trusted individual is paramount. Sometimes, the best approach is a hybrid: appointing an individual and a corporate trustee to serve as co-trustees, blending personal insight with institutional strength.
The goal is to ensure the structure you create serves its intended purpose. The costs are simply one part of a much larger equation about legacy, family, and the prudent management of what you’ve built. Stewardship. That is the heart of the matter.
Before you appoint a corporate trustee, bring their proposal and fee schedule to our office. We can perform a Fiduciary Fee Review, analyzing the agreement to model its long-term financial impact and ensure the terms align with your family’s objectives.
