Serving as a trustee of a trust can be a huge responsibility, so trustees are entitled to compensation for their work. The amount of compensation depends on the type of trustee and the complexity of the trust. 

Depending on the trust, a trustee's duties can include managing trust assets, making distributions to beneficiaries, paying taxes, and creating an annual report of all income and distributions. Performing these tasks can involve a lot of work, so it makes sense that trustees are compensated for their time. 

The terms of the trust may explain exactly what compensation the trustee is entitled to, but many trusts don't provide specifics. With no guidance from the trust document, the laws in most states usually require that trustee compensation be “reasonable,” without giving more details. What is considered reasonable is going to depend on the type of trust. Things to consider include the following:

• The amount of time needed to administer the trust.
• The complexity of the trust. 
• How many beneficiaries are involved. 
• What type of assets need to be managed. 

Often family members and friends serve as trustees without compensation. If their duties are modest — simply distributing trust assets, for example — that might be fine. 

With a more complicated trust, however, some compensation is expected. Professionals usually charge an annual fee of between 1 percent to 2 percent of assets in the trust. So, for example, the annual fee for a trust holding $1 million could be between $10,000 and $20,000. Often, professionals charge a higher percentage of smaller trusts and a lower percentage of larger trusts. 

A non-professional trustee usually charges less than a professional. However, if the non-professional trustee is doing all of the work for a trust, including investments, distributions and accounting, it may be appropriate to charge a similar fee. On the other hand, if the non-professional trustee is paying others to perform these functions or is acting as co-trustee with a professional trustee, charging this much may be seen as inappropriate. A typical fee might be a quarter of what the professional trustee charges, or .25 percent (often referred to by financial professionals as 25 basis points). If taking a percentage of the trust assets would deplete the trust, non-professional trustees may also charge an hourly rate for their work. 

In addition to compensation for their work, trustees are also entitled to reimbursement for any expenses that they might incur in the course of performing their duties, including travel, storage, insurance, or taxes. 

If the beneficiaries are unhappy with the fees the trustee receives, they can challenge them in court. And if trustees think they are entitled to more compensation, they can also appeal to court to receive higher payment. 

Whether you are setting up a trust or have been appointed trustee and want to know what fees are reasonable, consult with an estate planning attorney in your state. To find an attorney near you, click here.