Trustee fees bring up a tricky question: how much is fair for the work involved? At Woods & Bates, P.C., we focus on helping Illinois families create a secure future, which includes clear guidance on trusts and the people who run them.
Our goal here is simple: provide a plain-English guide to trustee fees and what counts as “reasonable compensation” under Illinois law. Estate and trust work often hits close to home, and we take that to heart. We serve families who want clarity and confidence, not confusion and guesswork. Let’s break down how trustee compensation really works in the Land of Lincoln.
Truth About Trustee Fees
Trustee fees are payments to a trustee for handling the trust, managing assets, paying bills, filing tax returns, and following the trust’s specific terms. The trustee can be an individual (like a family member), a bank, or a professional trust company.
Ideally, your trust document explicitly states how fees are set. If the trust is “silent” (meaning it doesn’t mention pay), Illinois state law fills the gap. Clarity on fees helps the trustee do their job without resentment and helps beneficiaries see the value provided.
- Individual Trustee: A family member or friend handling tasks like bill payment and distributions.
- Corporate Trustee: A bank or trust company with formal systems and published fee schedules.
- Co-Trustees: Two or more parties sharing duties, often a mix of family dynamics and professional oversight.
Defining ‘Reasonable Compensation’ in Illinois
In Illinois, the legal standard is reasonable compensation. Specifically, the Illinois Trust Code (760 ILCS 3/) states that if the trust instrument does not specify the trustee’s compensation, the trustee is entitled to compensation that is “reasonable under the circumstances.”
Unlike some states that use rigid formulas, Illinois courts look at the “totality of the circumstances.” Factors usually include:
- The size and character of the trust estate.
- The time and labor required.
- The complexity of the administration (e.g., managing a family business vs. a simple brokerage account).
- The professional skill and experience of the trustee.
- The fidelity and success of the trustee in managing the assets.
When fees are not pre-set, transparency builds trust. We recommend trustees use a consistent method for tracking time and tasks to provide a clear record for beneficiaries.
Professional vs. Non-Professional Trustees
Both can be effective, but they are compensated differently.
Compensation for Professional Trustees
Professional trustees in Illinois typically follow a published fee schedule. This is often a percentage of the market value of the assets under management.
| Method | Typical Range | Notes |
| Percentage of Assets | 0.75% to 1.5% annually | Often tiered (lower % for larger estates) |
| Flat Annual Minimum | $2,000 to $10,000+ | Varies by institution size |
| Hourly Billing | $150 to $450 per hour | Common for attorneys or CPAs serving as trustees |
| Extraordinary Fees | Varies | For selling real estate or handling litigation |
Compensation for Non-Professional Trustees
Family members often charge significantly less than a bank, and some choose to waive fees entirely. However, if they do take pay, it must still be “reasonable.” In Illinois, many individual trustees look to hourly rates or a modest percentage (often 0.50% to 1%) as a benchmark, provided they can justify the time spent.
Factors Influencing ‘Reasonableness’
If a beneficiary challenges a fee in an Illinois court, the judge will weigh several factors to ensure the trust isn’t being depleted unfairly.
- Risk and Responsibility: Does the trustee face high personal liability?
- Results Achieved: Did the trustee protect the principal and achieve reasonable growth?
- Local Standards: What are other trustees in Central Illinois charging for similar work?
- Extraordinary Services: Did the trustee have to clean out a hoarder’s house, manage a farm lease, or settle a complex IRS audit? These “heavy lifts” justify higher pay.
Practical Considerations: Taxes and Documentation
- Income Tax: In the eyes of the IRS and the Illinois Department of Revenue, trustee fees are taxable income to the trustee.
- Deductibility: The trust can usually deduct these fees as an administrative expense on its fiduciary income tax return (Form 1041).
- Record Keeping: Good records protect the trustee. We advise keeping a log of every phone call, meeting, and financial transaction related to the trust.
When Trustee Compensation Can Be Denied
An Illinois court has the authority to reduce or completely deny compensation if the trustee has committed a breach of trust. Common reasons include:
- Self-Dealing: Using trust money for personal investments.
- Commingling: Mixing trust funds with personal bank accounts.
- Failure to Account: Not providing beneficiaries with required annual reports.
- Negligence: Failing to pay property taxes or insurance, resulting in a loss to the trust.
Seeking Legal Counsel for Illinois Trustee Matters
Navigating the Illinois Trust Code can be daunting. Whether you are a trustee concerned about personal liability or a beneficiary who feels a fee is excessive, Woods & Bates, P.C. can help. We provide practical, calm, and professional guidance to ensure the trust is administered fairly and according to the law.You do not have to guess your way through trustee compensation. For straight talk and a plan that fits your family’s needs, call us at 217-735-1234. We look forward to helping you move ahead with confidence.