What Should a Trustee Be Paid for Managing a Trust?

Yes, trustee compensation is taxable income to the trustee. The trust can deduct the payment as an administrative expense. Some family trustees choose to waive compensation to avoid income tax, especially if they're also beneficiaries who would receive the funds tax-free as distributions.

Yes, family members serving as trustees are entitled to the same "reasonable compensation" as professional trustees. However, many family trustees choose to waive or reduce their fee, particularly if they're also beneficiaries. If you accept payment, keep detailed records of your time and duties.

Executor fees compensate for settling an estate through probate - typically a one-time process lasting several months. Trustee fees compensate for ongoing trust administration, which may continue for years or decades. If a trust simply distributes everything to adult beneficiaries, the trustee's work is similar to an executor's (one-time). If the trust continues (for minors, a surviving spouse, or special needs), annual fees are typical.

Many trust documents specify trustee compensation. Common provisions include a specific percentage, reference to "reasonable compensation," or a waiver of fees for family trustees. Always check the trust document first - it may override general compensation guidelines. If the document is silent, state law typically allows "reasonable" compensation.

Keep detailed records of time spent on trust duties: investment management, tax filings, beneficiary communications, bill payments, and distributions. Document the complexity of the trust and any special skills you bring. If beneficiaries question your fee, these records help demonstrate that compensation is reasonable for the work performed.