In New York, trustee commissions are set by statute — primarily SCPA 2309 — and paid as a tiered annual commission on trust principal plus a one-time 1% commission on principal paid out. The rates are bracketed, not flat, so a trustee’s effective percentage drops as the trust grows. Different rules apply to charitable trusts, corporate trustees, co-trustees, and any trust whose own instrument sets its own compensation terms.
The Annual Commission Formula
SCPA 2309 pays the trustee each year based on the total value of trust principal, using three brackets expressed as dollars per $1,000 of principal:
- First $400,000 of principal: $10.50 per $1,000 (effectively 1.05%)
- Next $600,000 of principal: $4.50 per $1,000 (effectively 0.45%)
- All principal above $1,000,000: $3.00 per $1,000 (effectively 0.30%)
The brackets stack. A $700,000 trust does not pay a flat 1.05% on the whole balance. The trustee earns $4,200 on the first $400,000 plus $1,350 on the next $300,000, for an annual commission of $5,550. On a $2 million trust, the yearly commission is $4,200 + $2,700 + $3,000, totaling $9,900.1New York State Senate. New York Code SCP 2309 – Commissions of Trustees
Run the math on your actual numbers before assuming a percentage. Trustees who treat the top-bracket rate as flat will overcharge, and beneficiaries who do the same may overpay without catching it.
The 1% Paying-Out Commission
On top of the annual commission, the trustee earns a one-time 1% commission on all principal distributed. It’s calculated when the trustee settles the account, which usually happens at trust termination or when a trustee resigns and files a final accounting.1New York State Senate. New York Code SCP 2309 – Commissions of Trustees
One exception: no paying-out commission is earned on principal distributed to a charity or for charitable purposes. If a trust ends and the remaining principal passes entirely to a charitable beneficiary, the trustee collects only the annual commissions already earned.
Who Pays: Income Versus Principal
Annual commissions do not come from a single pot. Unless the trust says otherwise, the default splits each annual commission one-third from income and two-thirds from principal.1New York State Senate. New York Code SCP 2309 – Commissions of Trustees The allocation matters because income beneficiaries and remainder beneficiaries have competing interests. More charged to income reduces current distributions; more charged to principal reduces what the remainder beneficiaries eventually receive.
Charitable remainder annuity trusts and charitable remainder unitrusts follow a different rule. Annual commissions on those trusts come from the corpus after the required annuity or unitrust payment is made, and cannot reduce the annuity or unitrust amount itself.
When More Than One Trustee Serves
Whether co-trustees each get a full commission depends on the trust’s size and age. For trusts established after August 31, 1993, with principal of $400,000 or more, each trustee (up to three) is entitled to a full commission, so the trust effectively pays double or triple the solo rate. If more than three trustees serve, only three full commissions are allowed in total and must be divided among them.
For trusts with principal between $100,000 and $400,000, up to two trustees can each earn a full commission. Below $100,000, only one full commission is allowed unless the trustees agree in writing to a different arrangement.
SCPA 2313 adds a cap: when the trust creator has not specifically authorized more than two commissions in a signed writing, no more than two full commissions may be paid regardless of how many trustees serve. The amount is then apportioned based on the services each trustee actually rendered, unless the trustees agree otherwise, and no single trustee can receive more than one full commission under that agreement.2New York State Senate. New York Code SCP 2313 – Apportionment of Commissions
This is where disputes often erupt. One trustee carries the administrative load while another signs off on decisions, and both expect equal pay. If the trustees cannot agree, the court allocates based on actual work performed.
Corporate Trustees
Banks and trust companies serving as trustees are governed by SCPA 2312. A corporate trustee is guaranteed at least what an individual trustee would earn under the statutory formula. But for trusts with principal above $400,000 where the instrument does not fix specific commission rates, a corporate trustee is entitled to “such commissions as may be reasonable,” which often exceeds the individual rates.3New York State Senate. New York Code SCP 2312 – Commissions of Corporate Trustees
For smaller trusts with principal of $400,000 or less, corporate trustees can charge annual commissions of up to $12.35 per $1,000 of principal, higher than the $10.50 per $1,000 individuals get on that bracket. The statute deems the enhanced rate reasonable. Corporate trustees also recover their reasonable and necessary expenses on top of commissions, which individual trustees generally cannot do without specific authority in the trust instrument.
Any person interested in the trust can ask the Surrogate’s Court to review a corporate trustee’s fees for reasonableness, and the court has broad discretion to adjust the compensation.
Charitable Trusts and Accumulated Income
Trusts created solely for charitable purposes use an entirely different compensation structure. The trustee of a wholly charitable trust earns 6% of the income collected each year and takes no commission from principal at all.1New York State Senate. New York Code SCP 2309 – Commissions of Trustees
Split-interest trusts that benefit a private beneficiary during a measuring life and then pass to charity are handled in two phases. During the private life interest, the trustee collects standard annual commissions on income and principal at the tiered rates, and the 1% paying-out commission applies to principal distributed during that period. Once the private interest ends and the trust continues for charitable purposes, the trustee shifts to the 6% income commission, and no paying-out commission applies to the principal eventually paid to charity.
When a trust directs or permits accumulation of income, the trustee still earns a commission on the accumulated income, at a reduced rate: 2% on the first $2,500 of accumulated income distributed and 1% on everything above that.1New York State Senate. New York Code SCP 2309 – Commissions of Trustees The trustee retains that commission when the accumulated income is eventually paid out.
When the Trust Instrument Controls
Before relying on any statutory rate, read the trust document. SCPA 2309 is explicit that when the will or trust instrument provides a specific compensation amount for the trustee, that trustee “is not entitled to any other allowances for his or her services.”1New York State Senate. New York Code SCP 2309 – Commissions of Trustees The statutory schedule is only a default, triggered when the trust is silent or uses a general reference to “commissions allowed by law.”
A trust creator can set compensation higher or lower than the statute, or eliminate it entirely. If the instrument’s language is ambiguous — whether it fixes specific compensation or merely points back to the statute — the question often ends up before the Surrogate’s Court for interpretation.
When Courts Reduce or Deny Commissions
Courts have broad discretion to cut or eliminate commissions when a trustee falls short of fiduciary standards. The threshold for denial is misconduct involving bad faith, complete indifference to fiduciary obligations, or significant misfeasance. Courts have said that commission denial should not function as a penalty but should reflect whether the trustee actually served the trust properly.4New York State Law Reporting Bureau. Matter of Gregory Stewart Trust
Common triggers for reduction include failing to keep adequate records, commingling trust funds with personal accounts, imprudent investments, and failing to give beneficiaries required information. In Gregory Stewart Trust, a trustee was denied annual commissions for two years because the trustee could not produce competent evidence of the trust’s value during those years. No documentation, no commission.
A trustee who resigns or is removed mid-administration may receive a prorated commission for the period actually served, but the court can reduce even that amount if the trustee’s conduct contributed to the removal.
During accounting proceedings, beneficiaries can object to commissions calculated on inflated asset valuations, commissions claimed on undistributed income, or fees charged for services the trustee never performed. If the trustee seeks additional compensation for extraordinary services such as managing litigation or overseeing complex business interests, the trustee must document that the work went beyond routine administration, and the burden of proof is on the trustee.
Tax Treatment
Trustee commissions are taxable income to the trustee who receives them. The trust can generally deduct them as an administrative expense. For a non-grantor trust, trustee fees are deductible on Form 1041 to the extent they meet 26 U.S.C. § 67(e), which limits the deduction to costs that would not have been incurred if the property were not held in trust.5Office of the Law Revision Counsel. 26 USC 67 – Two-Percent Floor on Miscellaneous Itemized Deductions Standard trustee commissions clear that bar because an individual property owner would not pay a trustee fee.
Bundled fees complicate the picture. When a single charge covers both trust administration and investment advisory services, the investment-advice portion is not deductible, because individuals routinely pay for investment advice outside a trust. If the bundled fee is not computed on an hourly basis, only the investment-advice component must be excluded from the deduction, and the rest remains deductible.6Internal Revenue Service. 2025 Instructions for Form 1041 and Schedules A, B, G, J, and K-1 The distinction matters most with corporate trustees charging a single asset-based fee for combined services.
Trusts Created on or Before August 31, 1956
Trusts created under wills of persons who died on or before August 31, 1956, or lifetime trusts established by that date, are governed by SCPA 2308 rather than 2309. The annual rates and income/principal allocation match SCPA 2309, but pre-1956 trusts also allow a commission for receiving principal, using tiered rates of 3% on the first $2,000, 1.5% on the next $10,000, and 1.25% above $12,000.7Justia Law. New York Code SCP 2308 – Commissions of Trustees of Pre-1956 Trusts If you are administering a long-running family trust from that era, confirm which statute applies before calculating your fee.