Trustee Fees: What Are They and Who Pays?

When creating an estate plan, you may have to name a trustee to handle your assets. For example, if you’re establishing a revocable living trust to pass on wealth to your spouse or children, a trustee would be responsible for managing it. While you could name yourself as a trustee, some situations may require that another individual or organization, such as a bank, fill the role. Trustees assume certain responsibilities when managing assets for a trust, and trustee fees help to compensate them for their time and efforts.

You may benefit from the hands-on guidance of a financial advisor in choosing a trustee or planning your estate.

Trustee Fees Explained

Trustee fees are compensation paid to the individual or institution responsible for managing a trust.

These fees can vary widely, depending on the complexity of the trust, the responsibilities involved and whether the trustee is a professional or a family member. Typically, trustee fees are outlined in the trust document, but they can also be subject to state laws and regulations.

Trustees can perform various duties, depending on the terms outlined in the trust document. Their main job is to ensure that the assets held in a trust are managed according to the wishes of the grantor, the person who created the trust, and on behalf of the trust’s beneficiaries. These responsibilities can include handling tax filings for the trust, distributing payments or assets to beneficiaries and managing investments held in the trust.

For these activities or any other fiduciary duties the trustee is obligated to do, they may be paid a fee.

Trustee Fee Structure

Typically, you specify the payment terms for a trustee in the trust document itself when you creating it. With that in mind, there are different ways to structure trustee fees.

For example, you might pay the trustee a figure that represents a set percentage of the assets in the trust each year. This is typically done when you have a larger trust with a high net worth that continually appreciates or generates ongoing income.

In the case of a smaller trust, a different fee structure may be used. Instead of a percentage, you may pay the trustee a flat dollar amount annually, or you may opt for an hourly rate if the trustee doesn’t have as many duties.

When writing a trust document, the grantor can set the terms of payment, including putting a limit on how much can be paid out in trustee fees. They can also set different payment terms for any successor trustees named in the document.

When a grantor doesn’t mention trustee fees in the trust document, state laws can determine the fee. Typically, states use the same guidelines for executor fees when determining trustee fees. They are either charged as a percentage of assets or as a percentage of transactions associated with money moving in or out of the trust.

State laws can also specify how successor trustees can and should be paid.

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Typical Trustee Fees

While there are no set rules for determining how much trustees can charge for their time, there are some commonly accepted baselines.

For example, it’s not unusual for trustees to charge a 1% or 1.5% fee for larger trusts with substantial assets. That means for a trust with $5 million in assets, the fee would work out to $50,000 a year.

With smaller trusts using a flat fee model, the numbers can look very different. For example, say you have a trust with $200,000 in assets. Using the 1% rule as a guideline, your trustee could collect $2,000 annually for their services. However, if the trust doesn’t require much hands-on management, it might make more sense for you to offer them a flat fee of $1,000 instead.

If you choose a person instead of a bank to serve as a trustee, you may be able to negotiate a fee structure that works for both of you. Or, say you opt to have a financial institution act as a corporate trustee. You can ask them to explain their fees upfront so you know what you’ll pay before deciding to give them the trustee role.

If you’re asked to serve as a trustee, consider what kind of commitment is expected of you and what your time is worth. If you’re not a licensed estate attorney, it likely won’t be realistic to charge what an attorney would. That said, you don’t want to shortchange yourself, either.

How Trustee Fees Are Paid

Trustee fees don’t come directly out of the grantor’s pocket. Instead, they’re typically paid out of the trust’s assets. Depending on what you specify in the trust document, payment of trustee fees can occur once per year or biannually, though quarterly is more common.

It’s also important to note that trustees are entitled to reimbursement for any reasonable expenses they pay out of pocket. That includes travel expenses, storage fees, taxes, insurance and any other expenses related to the management of the trust. These expenses are reimbursable, regardless of whether the trust document specifies any guidelines for reimbursement.

However, the trustee will need to keep accurate records of their out-of-pocket expenses, including mileage, to claim reimbursement.

How Trustee Fees Are Taxed

There are a few important tax rules to know if you set up a trust and name a trustee or if you’re named as a trustee by someone else.

Trustee fees are tax-deductible from the trust.
Trustee fees are considered taxable income for the trustee.
Professional trustees must pay self-employment tax on the fees they receive.

If you’re creating a trust, it helps to know what is and isn’t deductible when managing taxes in your estate plan. If you’re asked to be a trustee, consider how collecting fees as part of your taxable income may affect your tax liability when it’s time to file.

How to Choose the Right Trustee

Selecting a trustee is an important part of creating a trust.

The person or institution you choose will be responsible for managing assets, keeping records and following the trust’s terms as written. Trustees are fiduciaries, meaning they must act in the best interests of the beneficiaries and follow applicable laws and trust provisions.

You may name an individual, such as a relative or close associate, or a professional entity like a trust company or bank. Individual trustees may be familiar with the family and its circumstances, while professional trustees often have specialized knowledge and administrative resources. The decision can depend on the type of assets in the trust, its size and the level of management required.

It is common to name a successor trustee in case the original trustee cannot continue in the role. Providing clear instructions for succession in the trust document can help reduce administrative issues later.

Because a trustee has ongoing legal and financial obligations, it may be helpful to review your options with an estate planning attorney or financial advisor before finalizing your choice.

Individual Trustees vs. Corporate Trustees

Trustee fees often differ based on whether the trustee is an individual or a corporate institution.

Individual trustees are usually family members or close associates who understand the family’s situation and may charge modest fees or none at all. Their familiarity can help with communication and decision-making, although they may not have experience managing trust assets or handling administrative tasks.

Corporate trustees, such as banks or trust companies, follow formal procedures and have dedicated staff for recordkeeping, investment oversight and tax compliance. Their fees are generally higher because they provide professional administration and maintain systems that meet legal and fiduciary standards. This can be useful for trusts that hold substantial assets or require long-term management.

Longevity is an important distinction between the two options. An individual trustee may age, relocate or become unable to continue serving. A corporate trustee can provide ongoing administration because it operates as an institution that does not depend on a single person. This continuity can be helpful for multi-year or intergenerational trusts.

Oversight and impartiality also differ. Family members serving as trustees may face difficult conversations or conflicts among beneficiaries. Corporate trustees apply internal policies and legal requirements to help prevent disagreements and create a consistent process for managing requests and distributions.

Some grantors choose to appoint both an individual and a corporate trustee to combine personal familiarity with professional administration. This arrangement allows an individual to participate in decisions while relying on a corporate trustee for technical tasks, accounting requirements and long-term management.

Bottom Line

Trustee fees can be an overlooked part of the estate planning process, but you can’t afford to forget about them.

Trustee fees a crucial part of managing a trust, covering tasks like asset management and beneficiary payments while ensuring the trust’s terms are honored. Fees vary based on the trust’s complexity and the trustee’s role. Professional trustees, such as banks, often charge a percentage of the trust’s assets, while individual trustees may charge a flat or hourly fee.

For help managing your trust, consider reaching out a financial advisor for personalized guidance on trustees and their fees.

Estate Planning Tips

Consider talking to a financial advisor about the implications of paying trustee fees. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you’re considering a trust to protect investments or other assets, do your homework in comparing trust options. For example, some types of trusts are designed specifically for real estate investments, while others can be used to provide for disabled beneficiaries or shield assets from creditors.