Yes, trustees do get paid. Compensation comes out of the trust’s assets and is treated as an administrative expense of the trust, similar to legal or accounting costs. What a trustee actually receives depends first on the trust document and, when the document is silent, on state law’s reasonableness standard. Amounts range from a modest hourly rate for a family member handling a simple trust to tens of thousands of dollars a year for a corporate trustee running a complex portfolio.
What Sets the Amount
The trust document controls first. A grantor can specify a flat annual fee, an hourly rate, a percentage of assets, or any combination, and those terms govern as long as they remain reasonable.
If the document says nothing, state law fills the gap. More than 35 states have adopted some version of the Uniform Trust Code, which entitles a trustee to “compensation that is reasonable under the circumstances” even when the grantor never addressed the subject. States that haven’t adopted the UTC generally reach the same result through their own statutes or case law. Silence in a trust instrument does not mean the trustee works for free.
Courts can also override what the document says. If the specified fee turns out to be unreasonably high or unreasonably low compared with the actual work, a court can adjust it in either direction. That protects beneficiaries from overpaying and trustees from being locked into a rate that made sense at drafting but no longer reflects reality.
How Trustee Fees Are Structured
Compensation generally takes one of three forms: a percentage of trust assets, an hourly rate, or a flat fee.
Percentage of Assets
Percentage-based fees are standard for corporate trustees such as banks and trust companies. The annual fee typically falls between 1% and 2% of total trust assets, often on a tiered schedule where the percentage decreases as the value increases. Many corporate trustees impose a minimum annual fee, commonly $3,000 to $5,000, which means smaller trusts pay proportionally more. Some also charge an additional percentage on trust income received during the year.
Hourly Rates
Individual trustees, particularly family members or friends, more often charge by the hour or accept a flat annual payment. Professional independent fiduciaries who aren’t affiliated with a bank typically charge anywhere from $50 to over $150 per hour, depending on the market and the trust’s complexity. Non-professional trustees serving in a family capacity often charge less, and case law in some states treats $25 to $75 per hour as reasonable for straightforward administration.
Flat Fees
A flat annual amount is a common choice for family trustees when the workload is predictable. It can be written into the trust document or agreed between the trustee and the beneficiaries.
What Counts as a Reasonable Fee
When a fee is disputed or the trust is silent, the analysis focuses on concrete factors:
- Trust size and complexity. A trust holding rental properties, business interests, and illiquid assets demands more work than one holding a single brokerage account.
- Time actually spent. Trustees who can document their hours have a much easier time justifying a fee.
- The trustee’s skill and experience. A CPA or attorney serving as trustee can support higher pay than someone with no financial background.
- Risk assumed. Trustees carry personal liability for mismanagement, and greater exposure supports higher fees.
- Local custom. What other trustees in the same area charge for similar work sets a benchmark.
- Results achieved. Strong investment performance or the successful resolution of complex tax issues can support higher compensation.
Contemporaneous records of time spent and tasks performed are the strongest defense of any fee. Without documentation, the reasonableness argument gets much harder to win.
Fees When There Are Co-Trustees
When a trust names two or more co-trustees, the total they receive together generally should not exceed what a single trustee would earn for the same work. The fee gets divided based on the relative value of each co-trustee’s services, not split equally by headcount. A co-trustee who handles day-to-day investment management and beneficiary distributions earns a larger share than one who participates only in major decisions. The trust document can override this default, and some grantors do exactly that when they know one co-trustee will carry a heavier load.
Expense Reimbursement Is Separate
Trustee compensation is distinct from reimbursement. On top of their personal pay, trustees are entitled to be reimbursed by the trust for out-of-pocket costs properly incurred during administration. The Uniform Trust Code and virtually every state’s trust law recognize this right. Reimbursable costs commonly include legal fees for advice on administration or litigation, accounting and tax preparation, investment advisory fees, and property costs like taxes, insurance, repairs, and maintenance on real estate held in the trust.
Reimbursements are not income to the trustee. They are operational costs of the trust that the trustee happened to advance. A trustee who quietly absorbs these costs rather than seeking reimbursement can create complications, since it may look like a gift to the beneficiaries.
Taxes on Trustee Pay
Trustee fees are taxable income to the person who receives them. How they’re taxed depends on whether the trustee is acting professionally or as a family member in a one-off role.
Non-Professional Trustees
A family member or friend who serves in an isolated instance rather than as part of a regular business reports the fees as other income on their personal return. Under IRS Revenue Ruling 58-5, these fees generally are not subject to self-employment tax because the trustee isn’t operating a trade or business. One exception: if the trust holds an active business and the trustee participates in running it, the portion of fees tied to that business activity can be treated as self-employment income.
Professional Trustees
Trustees acting professionally, whether independent fiduciaries, attorneys, CPAs, or corporate trust departments, report their fees as business income subject to both income tax and self-employment tax. Corporate trustees report through normal business channels.
Deduction by the Trust
Trustee compensation paid by a non-grantor trust is deductible on the trust’s federal income tax return. The trust reports the deduction on Line 12 of Form 1041 as a fiduciary fee. The IRS allows this under Section 67(e) of the Internal Revenue Code because trustee fees are costs that would not exist if the property were not held in trust.1Internal Revenue Service. Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2025) Fees already deducted on an estate tax return (Form 706) cannot also be deducted on Form 1041. For grantor trusts, where the grantor is treated as the owner for tax purposes, the deductibility of trustee fees follows different rules that depend on the type of expense and the grantor’s own tax situation.
When Fees Can Be Challenged or Forfeited
Beneficiaries who believe a trustee is overcharging have real options. Under trust law in most states, trustees must give beneficiaries at least an annual report that includes the source and amount of the trustee’s compensation. Most fee challenges begin there. If regular accountings aren’t being provided, requesting one is the first step, and a trustee who resists is already creating evidence of a problem.
Compare the accounting against the reasonableness factors. How much time did the trustee spend? What tasks were performed? Is the fee proportionate to the trust’s size and complexity? A $15,000 annual fee looks very different on a $500,000 trust holding index funds than on a $5 million trust with real estate and business interests.
If informal resolution fails, a beneficiary can petition the probate court to review the compensation. The court applies the same reasonableness factors and can order the trustee to return the excessive portion to the trust. Under the Uniform Trust Code and equivalent state laws, available remedies for a breach of trust include reducing or entirely denying compensation, and in serious cases requiring the trustee to disgorge fees already paid. Timing matters. A beneficiary who receives accountings showing the fees and says nothing for years may lose the ability to challenge them.
A trustee who breaches fiduciary duty risks losing compensation altogether. Courts treat fee forfeiture as one of several remedies when a trustee acts in bad faith, engages in self-dealing, or causes losses through gross negligence, and the remedy can reach fees already received. The misconduct need not involve outright theft. Failing to diversify investments, ignoring conflicts of interest, or consistently neglecting administrative duties can all support a denial of compensation, and the more severe the breach, the more likely a court is to deny fees rather than simply reduce them.
Waiving Payment
Family members who serve as trustee sometimes choose to waive their fees, either because the trust is modest or because they feel uncomfortable being paid to manage a relative’s assets. That is permissible, but it should be handled deliberately rather than by simply never billing the trust.
A written waiver is the cleanest approach. The document should specify the period covered and be kept with the trust records. A trustee who waives fees for one year isn’t permanently locked in and can begin taking compensation later, though advance notice to beneficiaries is the prudent practice. If you don’t take the money, you don’t have income to report, and you also cannot deduct the value of the services you donated.