Trustee Fees: How Much Can a Trustee Charge?

Most family successor trustees don't realize they can be paid — or they decline out of habit without understanding what they're giving up. This guide covers the legal standard, the two main calculation methods, state-by-state rules, and the tax treatment you need to know before taking or waiving compensation.

The legal right to compensation

Serving as successor trustee is a fiduciary job with real legal exposure. The law recognizes this. The Uniform Trust Code (UTC § 708), adopted in whole or in part by most states, provides that a trustee is entitled to "reasonable compensation" from the trust even if the trust document is silent on the issue.¹

If the trust document specifies a fee, courts generally honor it — but can adjust it upward or downward if the actual duties were substantially different from what the settlor contemplated when writing the document, or if the specified amount is unreasonably low or high.

Declining compensation is always your right. But it is a financial decision, not an obligation. Many family trustees decline out of misplaced guilt or simply not knowing they can be paid. Once you understand the tax treatment and documentation requirements, the decision becomes clearer.

Two methods for calculating reasonable compensation

Method 1: Asset-based percentage (most common)

Courts, professional fiduciaries, and estate attorneys most often benchmark trustee fees against a percentage of trust assets under management — typically annually. This mirrors investment advisor and corporate trustee pricing and is easy to defend to beneficiaries and courts.

A key benchmark: corporate trustees charge 1.0–1.5% annually (plus minimums), so any individual trustee rate at or below that range is automatically defensible — you cost the trust less than an institutional alternative would.

Method 2: Time-based hourly rate

Some trustees track hours spent on trust business and charge an hourly rate. Courts and attorneys generally recognize $25–$100/hour as reasonable for non-professional individual trustees, depending on the complexity and the trustee's background. If you have relevant professional experience (attorney, CPA, financial advisor), higher rates may be defensible.

Time-based compensation is more work to document and harder to predict, but can favor trustees of small trusts with unusual complexity — for example, a $400,000 trust with active litigation that required 120 hours of work in a year.

Combining both methods

Nothing prevents you from taking the higher of asset-based and time-based compensation in years when your workload is unusually high. Document the calculation both ways and justify the method you used. Courts have approved this approach when the fee is consistent with corporate trustee benchmarks overall.

State-by-state rules

Most states follow the "reasonable compensation" standard and give courts broad discretion. A few states set more specific rules:

California

California Probate Code § 15681 provides that when the trust document does not specify compensation, "the trustee is entitled to reasonable compensation under the circumstances."² Courts and practitioners often use the statutory executor fee schedule (Probate Code § 10800) as a reference benchmark when evaluating reasonableness — not because it applies to trustees, but because it provides a defensible ceiling:³

• 4% of the first $100,000
• 3% of the next $100,000
• 2% of the next $800,000
• 1% over $1,000,000

On a $1.5M trust, this benchmark produces about $22,000 — higher than most individual trustee fees, which reinforces that courts have latitude to approve fees well within this ceiling.

Florida

Florida Statute § 736.0708(1) entitles trustees to "reasonable compensation" when not specified in the trust document. Courts compare rates to what professional fiduciaries in Florida charge for similar trusts. Florida also has a specific rule that an attorney who drafted the trust may not serve as paid trustee without making disclosures to the settlor — a common conflict-of-interest trap that doesn't apply to most individual successor trustees.⁴

New York

New York has the most specific trustee commission schedule in the country. Under Surrogate's Court Procedure Act § 2309, annual trustee commissions are calculated on a per-$1,000 basis:⁵

• $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 additional principal

Plus 1% of all principal paid out. On a $1.5M New York trust, the annual commission works out to approximately $5,700 — plus 1% of any distributions. New York co-trustees generally split this commission.

Texas

Texas Property Code § 114.061 entitles trustees to "reasonable compensation from the trust for acting as trustee" unless the trust provides otherwise. Courts may reduce or deny compensation if the trustee breached their fiduciary duties — which makes documented process especially important in Texas.⁶

All other UTC states

The remaining states that have adopted the Uniform Trust Code follow the "reasonable compensation" standard with courts evaluating all relevant factors: hours spent, trust complexity, asset size, skills required, results obtained, and what professional trustees charge in the same market.

How trustee fees are taxed

For the trust: fully deductible on Form 1041

Trustee compensation is reported on Form 1041 (Line 12, "Fiduciary fees") and is fully deductible against trust income — without being subject to the 2% miscellaneous itemized deduction floor that applies to individuals. This treatment is preserved under IRC § 67(e), which carves out trust administration costs unique to fiduciary administration from the normal 2% floor.⁷ IRS Notice 2018-61 confirmed this deductibility survives the Tax Cuts and Jobs Act changes to individual miscellaneous deductions.

At 2026 trust tax rates — which reach 37% at just $16,000 of income — the trust-level deduction is worth substantially more to the trust than the same deduction would be to most individual beneficiaries. Every dollar of legitimate trustee compensation paid out is a dollar not taxed at the compressed trust bracket.

For the trustee: ordinary income, but generally no self-employment tax

Trustee fees are ordinary income to you, reported on your personal Form 1040. However, for a one-time family trustee serving a single trust (as opposed to someone in the business of serving as a professional trustee), the IRS generally does not treat this income as self-employment income subject to SE tax — based on IRS guidance that isolated fiduciary service is not a "trade or business."⁸

If you serve as a professional trustee across multiple trusts as an occupation, SE tax applies. Consult your CPA if you're uncertain which category applies to you.

Form 1099-NEC reporting threshold

If the trust pays you $2,000 or more in a calendar year (the 2026 threshold, raised from $600 under the One Big Beautiful Bill Act), it must issue you a Form 1099-NEC.⁹ Below $2,000, no 1099 is required, though the income remains taxable. The trust's attorney or CPA typically handles this reporting as part of annual fiduciary tax administration.

Documentation requirements

Trustee compensation is subject to beneficiary scrutiny and court review. Document the basis for every fee before taking it:

Time log

Maintain a contemporaneous log of hours spent on trust business: investment review meetings, beneficiary correspondence, tax-filing preparation, real estate coordination, legal appointments. A credible time log is your primary defense if a beneficiary challenges a time-based fee or argues an asset-based fee is excessive relative to the work performed.

Trustee resolution or fee agreement

Before taking compensation, document the fee basis in a written trustee resolution: the method (asset-based or hourly), the rate, and the calculation for the period. Where the trust has co-trustees, the resolution should reflect all co-trustees' agreement. This creates a clear paper trail predating any beneficiary dispute.

Annual accounting disclosure

Under UTC § 813 and most state equivalents, annual accountings to beneficiaries must disclose trustee compensation taken during the period. Don't bury this. Transparent, documented disclosure is your best protection against a surcharge claim — and in most states, beneficiaries who receive and don't object to an accounting within the statutory limitation period lose their right to challenge the fees later.

When declining compensation makes sense

Despite the legal entitlement, declining is sometimes the right financial decision:

Medicaid planning for a living trust beneficiary

If you are both trustee and beneficiary, and trustee fees would be counted as income for Medicaid eligibility purposes in your state, declining may preserve Medicaid eligibility. This is a narrow scenario — discuss with an elder law attorney before serving as a paid trustee-beneficiary if Medicaid is a concern.

Short, simple trusts with cooperative families

For a trust that will terminate in six months, involves one beneficiary, and requires minimal administrative work, the friction of documenting and justifying a fee may not be worth the effort. The practical cost-benefit tilts toward waiving for very short-duration simple trusts.

Family dynamics

In families where one sibling is trustee and others are beneficiaries, taking compensation — even fully justified compensation — can inflame existing tension. This is not a legal reason to decline, but it's a real consideration. A fee-only advisor can help you model the after-tax value of the compensation versus the relational cost and structure transparent communication to beneficiaries if you decide to take it.

Trustee compensation calculator

Use our Trustee Compensation Calculator to generate a defensible annual fee range using both the asset-based and time-based methods. The calculator also shows how your calculated range compares to what corporate trustees charge for the same size trust — giving you a ready benchmark if beneficiaries question the fee.