SCPA 2309: Trustee Commissions — Rates, Calculation, and Examples

Serving as the trustee of a New York trust is real work: investing assets, keeping records, filing fiduciary income tax returns, making distributions, and answering to beneficiaries. New York law compensates trustees for this work through statutory commissions. The governing statute is Surrogate's Court Procedure Act (SCPA) § 2309, which sets the commission rates for trustees of lifetime (inter vivos) trusts and trusts created under the wills of persons who died after August 31, 1956. (Trusts under wills of persons who died before September 1, 1956 are governed by the older rate structure in SCPA § 2308.)

This page explains, in plain language, what SCPA 2309 provides, how the commissions are actually calculated with worked numerical examples, how commissions are taken or approved in Surrogate's Court, and the mistakes that most frequently lead to objections and surcharges.

The Two Types of Trustee Commissions Under SCPA 2309

Unlike an executor, who receives a one-time commission when the estate is settled, a trustee typically serves for years or decades. SCPA 2309 therefore provides two distinct forms of compensation:

• Annual principal commissions — a yearly commission computed on the value of the trust principal (SCPA 2309(2)); and
• A paying-out commission — a one-time commission of 1% of principal paid out, allowed on the settlement of the trustee's account (SCPA 2309(1)).

Annual Principal Commissions: The Rates

SCPA 2309(2) expresses the annual commission in dollars per $1,000 of trust principal. The rates are tiered, so larger trusts pay a lower effective percentage on the amounts above each threshold:

The annual commission is computed on the value of the trust principal at the end of the annual period for which the commission is payable. This means the trustee must value the trust assets — including securities, real property, and business interests — each year. For marketable securities the valuation is straightforward; for real property or closely held interests, the trustee should be prepared to justify the valuation used, because an inflated value inflates the commission and invites objections at an accounting.

The 1% Paying-Out Commission

Under SCPA 2309(1), when the trustee's account is settled, the trustee is allowed a commission of 1% on all sums of principal paid out. This commission is most significant when the trust terminates and the trustee distributes the remaining principal to the remainder beneficiaries, but it also applies to principal distributions made during the life of the trust (for example, discretionary principal invasions for a beneficiary's health or support).

Who Pays: One-Third From Income, Two-Thirds From Principal

Unless the will or trust instrument provides otherwise, SCPA 2309 directs that annual commissions be paid one-third from the income of the trust and two-thirds from the principal. This allocation matters because trusts commonly have different beneficiaries for income and principal. An income beneficiary bears one-third of the annual commission through reduced income distributions; the remainder beneficiaries bear two-thirds through reduced principal. A trustee who charges the entire commission to income — or the entire commission to principal — has misallocated the burden between classes of beneficiaries and can be surcharged for the difference.

Worked Examples

Example 1: Trust With $600,000 in Principal

• First $400,000 × 1.05% = $4,200
• Next $200,000 × 0.45% = $900
• Total annual commission: $5,100

Of that $5,100, $1,700 (one-third) is charged against trust income and $3,400 (two-thirds) against principal, absent a contrary provision in the instrument.

Example 2: Trust With $1,500,000 in Principal

• First $400,000 × 1.05% = $4,200
• Next $600,000 × 0.45% = $2,700
• Remaining $500,000 × 0.30% = $1,500
• Total annual commission: $8,400

Note the effective rate: $8,400 on $1,500,000 is 0.56% per year — well below the 1.05% top-bracket rate, because of the tiering.

Example 3: Trust Termination and the Paying-Out Commission

Suppose the trust in Example 2 terminates after fifteen years and the trustee distributes $1,500,000 of principal to the remainder beneficiaries. On settlement of the account, the trustee is allowed a paying-out commission of 1% of $1,500,000, or $15,000, in addition to the annual commissions properly taken (or allowed) for each year of the administration.

Multiple Trustees

SCPA 2309 addresses co-trustees directly, and the trust's size determines the outcome:

• Principal of $400,000 or more: each trustee, up to a maximum of three, is entitled to a full commission. If there are more than three trustees, three full commissions are apportioned among them according to the services rendered, unless they agree in writing to a different apportionment.
• Principal under $400,000: the co-trustees must share a single full commission, apportioned according to the services each rendered, unless they have agreed in writing to a different split.

Using Example 2 above: a $1,500,000 trust with two trustees generates two full annual commissions of $8,400 each — $16,800 per year in total. This is a significant cost that settlors should weigh when naming multiple trustees, and that beneficiaries should verify is being computed correctly.

The Annual Statement Requirement

SCPA 2309 permits a trustee to retain annual commissions each year without a court order, but only if the trustee complies with the statute's disclosure condition: the trustee must furnish an annual statement showing the principal assets on hand and the manner in which the commissions were computed. The statement goes to the creator of a lifetime trust if living, and otherwise to the beneficiaries currently entitled to receive income from the trust. This requirement is not a formality — it is the statutory price of self-help. A trustee who takes annual commissions without furnishing the statement is exposed to objections, disallowance, and surcharge with interest when the account is judicially settled.

A trustee who does not retain annual commissions in a given year does not forfeit them, but there is a catch: commissions taken later are computed on the value of the principal at the time they are actually retained, not on a historical value the trustee finds more favorable. A trustee cannot look back and cherry-pick the year-end valuations that maximize compensation.

Additional Commission for Managing Real Property

Where the trustee is required to collect rents and manage real property held in the trust, SCPA 2309 allows an additional commission of 6% of the gross rents collected, on top of the annual and paying-out commissions. This reflects the hands-on nature of property management. It applies only when the trustee actually performs the management function; a trustee who hires a managing agent and pays the agent from trust funds should not also take the full statutory rent commission for work the trustee did not perform.

When the Trust Instrument Overrides the Statute

SCPA 2309 supplies default rules. The will or trust agreement can modify them. If the instrument fixes the trustee's compensation — for example, a stated annual fee, or a direction that the trustee serve without commissions — the trustee who accepts the appointment is bound by that provision and is not entitled to the statutory rates in addition. The instrument can also change the one-third/two-thirds income-principal allocation. Beneficiaries and trustees alike should read the compensation clause of the instrument before assuming the statutory schedule applies.

Corporate Trustees: SCPA 2312

Banks and trust companies serving as trustee are generally compensated under SCPA § 2312, which entitles a corporate trustee to "reasonable compensation," typically per its published fee schedule, rather than the SCPA 2309 rates. Corporate fee schedules are frequently higher than the statutory rates, particularly on larger trusts. Individual trustees, by contrast, are compensated under SCPA 2309 unless the instrument provides otherwise.

Procedure in Surrogate's Court

Trustee commissions intersect with Surrogate's Court practice in several ways:

1. Annual self-help retention. As described above, a trustee may retain annual commissions each year without court involvement, provided the annual statement is furnished to the required recipients. The trustee should document the year-end valuation, the bracket-by-bracket computation, and the income/principal allocation in the trust records.
2. Judicial settlement of the account. Commissions are ultimately reviewed and allowed (or disallowed) when the trustee accounts — whether voluntarily (SCPA § 2208), on the petition of a beneficiary to compel an accounting (SCPA § 2205), or at the termination of the trust. The accounting schedules must set forth the commissions taken and claimed, and the decree settling the account fixes them.
3. Objections. Any interested party may file objections to the commissions claimed in an accounting — for miscalculation, for failure to furnish annual statements, for improper allocation between income and principal, or on the ground that the trustee's misconduct warrants denial of commissions.
4. Denial or reduction for misconduct. Commissions are compensation for faithful service. The Surrogate has discretion to deny or reduce commissions where the trustee has committed a serious breach of fiduciary duty — self-dealing, imprudent investment, failure to account, or neglect of the trust. A surcharged trustee frequently loses commissions as well.

There is no fixed statutory deadline for a trustee to take annual commissions, but delay carries the valuation consequence noted above, and the trustee's entire course of conduct — including commission practices — is open to scrutiny for the full accounting period once an accounting proceeding is commenced.

Common Pitfalls

• Skipping the annual statement. The most common error. Retaining commissions without sending the required statement converts a lawful payment into a vulnerable one.
• Flat-rate miscalculation. Applying 1.05% to the entire principal instead of tiering the brackets overstates the commission on any trust over $400,000.
• Charging everything to income. Absent a contrary instrument provision, one-third comes from income and two-thirds from principal. Misallocation shifts costs between beneficiary classes and draws objections.
• Overstating asset values. Because the annual commission is value-based, aggressive valuations of real estate or business interests inflate compensation and invite surcharge.
• Ignoring the co-trustee rules. Two trustees of a $350,000 trust share one commission; they do not each take a full one.
• Confusing executor and trustee commissions. Executor commissions are governed by SCPA § 2307, at different rates. A person serving in both capacities under a will may be entitled to commissions in each capacity where the will creates genuinely separate functions, but this is a fact-specific question that should be analyzed before commissions are taken in both roles.
• Forgetting the tax treatment. Commissions are taxable income to the trustee. A trustee who is also a beneficiary may in some situations be better served by waiving commissions and receiving the funds as a distribution — a decision that should be made with tax advice before commissions are taken.

Speak With a New York Trusts and Estates Attorney

Albert Goodwin is a New York attorney who represents trustees and beneficiaries in matters involving trustee commissions, trust accountings, and contested proceedings in Surrogate's Court, including objections to commissions and applications to compel or settle a trustee's account. If you have a question about how SCPA 2309 applies to your trust, you are welcome to reach out for a consultation.

Related resources on this site: trustee commission calculator, executor commission calculator.