When setting up a trust, one common question people ask is, “Do trustees get paid?” The short answer is yes—but how much they get paid and how it is determined depends on various factors. Whether you’re appointing someone as a trustee or considering serving as one yourself, it’s important to understand New York’s regulations surrounding trustee compensation to maintain transparency and trust.
Here, we’ll break down how trustee payment is calculated in New York, the responsibilities that justify this compensation, and other factors you should know when planning your estate.
What Does a Trustee Do?
Before we discuss compensation, it’s essential to grasp the responsibilities that come with being a trustee. A trustee is responsible for managing the assets of a trust for the benefit of its beneficiaries. This involves administrative duties like maintaining records, investing trust assets prudently, distributing income or assets as directed by the trust, and ensuring compliance with legal obligations like tax filings.
These responsibilities demand diligence, honesty, and a significant time investment. Naturally, such responsibilities come with fair compensation to account for the trustee’s efforts, especially given the fiduciary duties they must uphold.
How Much Are Trustees Paid?
Guidance Under New York Law
New York’s Surrogate’s Court Procedure Act (SCPA) Section 2309 provides a structured framework for determining trustee compensation. Unless the trust document specifies a different payment method, New York law offers a commission schedule based on the trust’s value and type of duties performed.
According to SCPA Section 2309, trustees are entitled to annual commissions as follows:
- $10.50 per $1,000 of principal on the first $400,000.
- $4.50 per $1,000 of principal on the next $600,000.
- $3.00 per $1,000 of principal over $1,000,000.
Additionally, trustees managing real property may be allowed 6% of gross rents collected.
Distribution of Commissions
Trustees typically receive their commissions from both the income and principal of the trust. By default:
- One-third of the commission is paid from income.
- Two-thirds is paid from principal unless otherwise specified in the trust document.
Specified Compensation in the Trust
If the trust document explicitly states how much or in what manner the trustee will be compensated, that provision overrides the statutory guidelines. For example, the trust may establish a fixed fee, an hourly rate, or a percentage-based commission.
Factors That Influence Compensation
While statutory guidelines offer a baseline, several factors might influence the final compensation of a trustee, including:
- Complexity of the Trust: Trusts with diverse or complex assets, such as investments, businesses, or international accounts, require more expertise and time commitment.
- Time and Effort: Trustees who dedicate extensive time to managing the trust or resolving disputes among beneficiaries may justify higher compensation.
- Professional vs. Individual Trustees: Corporate or professional trustees (e.g., law firms or banks) often charge a separate fee schedule that can sometimes exceed statutory commissions. Individual trustees, whether family members or close friends, can opt for compensation based on statutory rates or according to the terms outlined in the trust.
Can Trustees Be Paid in Advance?
Yes, trustees can petition the court to receive advance commissions in New York. This process requires court approval and is often used when the trustee needs to cover immediate costs associated with managing the trust.
Additionally, trustees can seek approval to “fix” their commissions during periodic accountings to avoid disputes among beneficiaries.
Communication Is Key
To avoid tension or disputes over compensation, trustees should maintain clear communication with beneficiaries. Providing annual statements that detail trust expenses, income, and commissions can help ensure transparency and foster trust within the family or group of beneficiaries.
Trustees are encouraged to keep meticulous records of the time spent, tasks performed, and expenses incurred while managing the trust. These records will serve as important documentation to demonstrate the scope of their responsibilities and justify their compensation, should any disputes arise.
Considering Trustee Compensation in Your Estate Plan
If you’re appointing a trustee, carefully consider the complexity of the trust and whether the individual you choose will require payment. For professional trustees, compensation can often be worth the cost for the expertise they add. For individual trustees, such as family members, clearly outlining payment in the trust document can avoid misunderstandings or conflicts later.
Have More Questions?
Navigating trustee compensation can seem complex, but you don’t have to do it alone. The process can be simplified with the right guidance and expertise in estate planning. Whether you’re designing a trust or preparing to serve as a trustee, our experienced estate planning professionals can provide clarity every step of the way.
Contact us today to set up a consultation and build an estate plan that reflects your values and priorities. Together, we’ll ensure that your family and estate are in safe hands.
