NY Trustee Duties & Commissions (SCPA 2309)

Written by Albert Goodwin, Esq., attorney admitted to practice in New York, Law Offices of Albert Goodwin, New York City. Last reviewed: [insert review date]. Statute links below go to the official text on nysenate.gov.

A trustee holds legal title to trust property and manages it for the beneficiaries. In New York the job is governed by the Estates, Powers and Trusts Law (EPTL) and, when the trust is in the Surrogate's Court, by the Surrogate's Court Procedure Act (SCPA). This page covers the two questions New York trustees and beneficiaries ask most: how much a trustee is paid under SCPA 2309, and what a trustee has to do to qualify and serve. Misconduct, removal and accountings are covered on separate pages linked at the end.

A note from practice. The most common problem we see when a successor trustee takes over a New York revocable trust after the grantor's death is that the trust was never funded. The house is still deeded to the decedent individually and the brokerage account is still in the decedent's own name. The successor trustee has authority over an empty trust. The fix is usually to probate the pour-over will (or use a small-estate proceeding under SCPA Article 13 if the assets qualify), have the executor transfer the assets into the trust, and then administer the trust as the grantor intended. The sections below on funding and on taking over as successor trustee explain how to check for this before it becomes a problem.

How Much a Trustee Is Paid in New York: SCPA 2309

New York fixes trustee commissions by statute. For an individual trustee of a trust created after August 31, 1956, SCPA 2309 provides two kinds of commission.

Annual commission on principal: computed each year on the value of the trust principal at these graduated rates: $10.50 per $1,000 (1.05%) on the first $400,000; $4.50 per $1,000 (0.45%) on the next $600,000; and $3.00 per $1,000 (0.30%) on all principal above $1,000,000.
Paying-out commission: 1% of the principal the trustee actually pays out, taken when distributions of principal are made.

Worked example: a $1,500,000 trust

Assume a single individual trustee and trust principal valued at $1,500,000 for the year.

First $400,000 at 1.05% = $4,200
Next $600,000 at 0.45% = $2,700
Remaining $500,000 at 0.30% = $1,500
Annual commission = $8,400

Unless the instrument says otherwise, SCPA 2309 charges one-third of that annual commission to trust income and two-thirds to principal. On these numbers, $2,800 comes out of the year's income and $5,600 comes out of principal. The split matters because the income beneficiary and the remainder beneficiaries are often different people, and each bears a different share of the trustee's pay.

If the trust terminates and the trustee distributes the full $1,500,000 of principal, the trustee also takes the 1% paying-out commission, which on that figure is $15,000.

Co-trustees

Under SCPA 2309, when trust principal is $400,000 or more, each trustee is entitled to a full commission, up to three full commissions. If more than three trustees serve, three full commissions are divided among them. On the $1,500,000 example above, two individual co-trustees would each take $8,400 a year, a total of $16,800. Where principal is under $400,000 and more than one trustee serves, one commission is divided according to the services each trustee performs. Before naming two or three trustees, grantors should price this out.

Other points on trustee compensation

Annual statements: a trustee who takes annual commissions must give each beneficiary an annual statement showing the principal on hand and the commissions taken. Failing to do so is a frequent objection at the accounting.
Rents: where the trustee must collect rents and manage real property, SCPA 2309 allows a separate commission of 6% of gross rents collected.
The instrument controls: if the will or trust fixes the trustee's compensation, that provision governs. A trustee who accepts the appointment under such an instrument generally takes the fee the instrument provides.
Corporate trustees: SCPA 2312 entitles a bank or trust company to reasonable compensation under its published fee schedule rather than the 2309 table, and requires the corporate trustee to make that schedule available. Corporate fees are usually a percentage of assets under management and can run well above the statutory individual rates on a large trust. See using a bank as a trustee in New York.
Court review: annual commissions may be taken without a prior court order, but every dollar is subject to review when the trustee accounts. A trustee who has breached a duty can be denied commissions in whole or in part.

Letters of Trusteeship in New York

Letters of trusteeship are the Surrogate's Court certificate that proves a trustee's authority. Who needs them depends on how the trust was created.

Testamentary trust (a trust written into a will): the trustee must obtain letters of trusteeship from the Surrogate's Court that admitted the will to probate. The executor cannot fund the trust until the trustee has qualified.
Lifetime (inter vivos) trust: letters are not required. The trustee's authority comes from the instrument itself. A lifetime trustee may still petition for letters under SCPA Article 15, and in practice this is done when a bank, title company or out-of-state institution refuses to act on a copy of the trust alone.

What the Surrogate's Court requires

The petition for letters of trusteeship is filed in the Surrogate's Court of the county where the will was probated (or, for a lifetime trust, where the trust is administered). A typical filing includes:

the petition identifying the trust, the trust property and all persons interested in the trust;
the trustee's oath and designation of the Clerk of the Surrogate's Court for service of process under SCPA 708;
waivers and consents from adult beneficiaries, or citation to those who do not consent;
a bond, unless the will or trust dispenses with one. Most instruments contain language such as "without bond or other security in any jurisdiction." If the instrument is silent, the court sets the bond based on the value of the trust property, and the premium is an annual trust expense.

Who cannot be a trustee

Eligibility for letters follows SCPA 707, which the court applies to trustees through Article 15. A person is ineligible if the person is under 18, is an incapacitated person, is a convicted felon, or does not have the qualifications to serve because of substance dependence, dishonesty, improvidence or want of understanding. A non-domiciliary alien (a non-citizen who lives outside New York) may serve only alongside a co-trustee who is a New York resident.

Example of how this comes up. A will names the testator's brother, who lives in Toronto and is not a United States citizen, as sole trustee of a trust for the testator's children. The court will not issue letters to him alone. The options are to have a New York resident co-trustee appointed with him, or, if the will names no alternate, to petition under SCPA 1502 for the court to appoint a trustee so the trust does not fail. The felony bar works the same way: the court will decline to issue letters, and a successor must be found. See fiduciaries with felony convictions for how the court treats older or out-of-state convictions.

Creating and Funding a Lifetime Trust in New York

A trustee's authority is only as good as the trust itself. Two EPTL provisions decide most disputes over whether a New York lifetime trust is valid and whether property is actually in it.

Execution, EPTL 7-1.17: a lifetime trust must be in writing and signed by the creator and by at least one trustee (unless the creator is the sole trustee). The signatures must either be acknowledged before a notary in the manner required to record a deed, or signed in the presence of two witnesses who also sign. A trust signed by the grantor alone, without a notary or witnesses, does not meet the statute.
Funding, EPTL 7-1.18: the trust is valid only as to property actually transferred to the trustee. Titled assets (real property, brokerage and bank accounts, vehicles) must be retitled in the trustee's name. Untitled assets must be assigned to the trustee in a signed writing. A schedule of assets stapled to the trust is not a transfer.
Revocability, EPTL 7-1.16: a New York lifetime trust is irrevocable unless the instrument expressly says it is revocable.

For which assets belong in a revocable trust and which do not, see what can and cannot go into a revocable trust.

What a New York Trustee Must Do: Duties Under the EPTL

The trust instrument comes first. Where it is silent, the EPTL supplies both the trustee's powers and the standards the trustee is held to.

Statutory powers, EPTL 11-1.1: EPTL 11-1.1 gives a trustee power to invest, sell, lease, mortgage, insure, settle claims, and hire agents, unless the instrument restricts those powers. No court order is needed to exercise them.
Prudent investing, EPTL 11-2.3: the Prudent Investor Act judges investment decisions by the whole portfolio and the purposes of the trust, requires diversification unless the trustee reasonably decides not to diversify, and permits the trustee to delegate investment management to a professional while keeping a duty to supervise. In Matter of Janes, 90 N.Y.2d 41 (1997), the Court of Appeals surcharged a corporate fiduciary that held a concentrated position in a single stock for years without a documented reason. The duty to review and diversify is the duty most often litigated.
Loyalty: the trustee may not buy from, sell to, or borrow from the trust, and may not favor one beneficiary over another for personal reasons. Matter of Rothko, 43 N.Y.2d 305 (1977), remains the leading New York statement that a fiduciary who deals with estate or trust property in a conflicted transaction answers for the full loss, including lost appreciation. For beneficiaries considering a purchase, see a beneficiary buying property from a trust.
Discretion is reviewable: even where the instrument gives the trustee "sole and absolute" discretion over distributions, the trustee must act in good faith and in the beneficiary's interest. In Matter of Wallens, 9 N.Y.3d 117 (2007), a father serving as trustee used trust funds for his daughter's school tuition and other expenses he had a personal obligation to pay. The Court of Appeals held that the discretionary language did not relieve him of the duty to show the expenditures were in the beneficiary's best interests, and sent the matter back for a hearing on that question.
Separate property and records: trust assets must be held in the name of the trust, never commingled with the trustee's own funds, with records sufficient to account for every receipt and disbursement.
Duty to account: a New York trustee can be compelled to account in the Surrogate's Court under SCPA Article 22. A judicial decree settling the account is binding on the beneficiaries who were cited. In Matter of Hunter, 4 N.Y.3d 260 (2005), the Court of Appeals held that beneficiaries who could have objected in an earlier accounting could not relitigate those years later. How the proceeding works is covered on trust and estate accountings.
Exculpation has limits: EPTL 11-1.7 voids any clause in a will that purports to excuse a testamentary trustee from liability for failing to exercise reasonable care, diligence and prudence. Courts apply the same policy to clauses that would excuse bad faith or reckless indifference in lifetime trusts.

What a beneficiary is entitled to see, and when, is on a beneficiary's right to trust information.

Taking Over as Successor Trustee After the Grantor Dies

For a successor trustee of a New York revocable trust, the first weeks follow a predictable sequence.

Obtain certified death certificates and locate the original trust and all amendments.
Confirm the trust was properly executed under EPTL 7-1.17.
Check funding under EPTL 7-1.18. Pull the deed for any real property and confirm the grantee is the trustee. Confirm each account is titled in the trust. Anything still in the decedent's individual name passes under the will, not the trust, and requires probate or a small-estate proceeding.
Apply to the IRS for a new employer identification number. The trust was a grantor trust reporting under the grantor's Social Security number during life; that ends at death.
Give the banks and brokerages a certification of trust or a copy of the trust, the death certificate and the acceptance of trusteeship. If an institution insists on court paper, petition for letters of trusteeship under SCPA Article 15.
Prepare an opening inventory with date-of-death values. These values set the basis for the annual commission computation and for the eventual accounting.
Identify the beneficiaries, read the distribution provisions, and calendar any mandatory distribution dates.

If the trust was created to avoid probate, the funding check in step 3 is where that plan either works or fails. See avoiding probate in New York for what a properly funded trust accomplishes.

Resignation, Vacancies and Successors

Under EPTL 7-2.6, a trustee resigns in the way the instrument provides. If the instrument is silent, the trustee must petition the court (the Surrogate's Court for a testamentary trust, the Supreme Court or Surrogate's Court for a lifetime trust), which accepts the resignation, settles the resigning trustee's account and confirms the successor. A trustee who stops acting without doing this remains liable for the trust and must still account for the period of service.

If every named trustee has died, declined or been removed and the instrument names no one else, the trust does not fail. Under EPTL 7-2.3 and SCPA 1502, a beneficiary or other interested person petitions the court to appoint a trustee. The court looks first to the grantor's apparent preferences in the instrument, then to the beneficiaries' nominations.

Frequently Asked Questions About New York Trustees

Can a trustee live in trust property in New York?

Not for free, unless the instrument permits it or the trustee is also a beneficiary entitled to use the property. Occupying trust real property without paying fair rent is self-dealing and is surcharged at the accounting. Where the trustee is one of several beneficiaries, the usual solution is a written occupancy agreement at fair market rent, with the other beneficiaries' consent. See a beneficiary living in the trust's house.

Does a New York trustee have to file a tax return?

During the grantor's life, a revocable trust is a grantor trust and its income is reported on the grantor's own return. After death, or for an irrevocable non-grantor trust, the trustee files federal Form 1041 and New York Form IT-205 if the trust has gross income above the filing threshold or New York source income. A New York resident trust with no New York trustee, no New York assets and no New York source income may be exempt from New York fiduciary tax under Tax Law 605(b)(3)(D), but the trustee still files to claim the exemption. The trustee is personally responsible for getting this done.

Can a trustee be removed without going to court?

Only if the instrument gives someone that power. The grantor of a revocable trust can remove a trustee by amendment under EPTL 7-1.17. Many irrevocable trusts give a trust protector or a majority of adult beneficiaries a power to remove and replace the trustee. Absent such a clause, removal requires a court proceeding under EPTL 7-2.6 or SCPA 711 on grounds such as misconduct, unfitness or breach of duty. That proceeding is covered on removing a fiduciary in New York.

Can a trustee also be a beneficiary?

Yes. In Matter of Heller, 6 N.Y.3d 649 (2006), the Court of Appeals held that trustees who were also remainder beneficiaries could make a unitrust election under EPTL 11-2.4 even though the election increased their own share, subject to the court's review of good faith. A trustee-beneficiary must still treat the other beneficiaries impartially, and distributions to the trustee personally are examined closely at the accounting.

Do I need letters of trusteeship for a living trust?

No. The trustee of a lifetime trust acts under the instrument and EPTL 11-1.1. Letters are obtained only when an institution demands them or when court supervision is otherwise needed.

How often does a trustee have to account in New York?

No statute sets a fixed schedule. Good practice is an informal annual statement to each beneficiary, which SCPA 2309 requires in any event when annual commissions are taken, and a formal accounting when the trust terminates, a trustee changes, or a beneficiary demands one. Any beneficiary can petition to compel an accounting under SCPA Article 22.

Does a trustee have to hire a lawyer?

No, but attorney's fees for trust administration are a proper trust expense when reasonable and benefiting the trust. A trustee who handles a testamentary trust in the Surrogate's Court without counsel will be held to the same standard as one who has counsel.

This page covers the trustee's compensation, qualification and duties. These topics are covered elsewhere on this site:

Setting up a trust in New York City: choosing the type of trust and the right trustee.
Bank as trustee: corporate trustees and SCPA 2312 fees.
Beneficiaries' rights to trust information: what a trustee must disclose.
Breach of trust and breach of fiduciary duty: surcharge and remedies.
Trust and estate accountings: SCPA Article 22 proceedings.
Letters testamentary: how an executor, as opposed to a trustee, qualifies.

Talk to a New York Trust Attorney

If you have been named trustee of a New York trust, are deciding whether to accept, or are a beneficiary trying to check a trustee's commissions or conduct, we can help. The Law Offices of Albert Goodwin represents trustees and beneficiaries in the Surrogate's Courts of New York City, Long Island and Westchester, with offices in Manhattan, Brooklyn and Queens. Call 212-233-1233 or email [email protected].

This page is general information about New York law and is not legal advice. Reading it does not create an attorney-client relationship. Commission figures are computed under SCPA 2309 as currently in effect; the terms of a particular trust instrument may change the result.