What Trustees Need to Know About Getting Paid in North Carolina

If you’ve been named as a trustee, one of the first questions that may come to mind is: What am I entitled to be paid? Managing a trust can be time-consuming, and trustees are generally entitled to compensation for their work. However, how that compensation is determined depends on several key factors—especially the language of the trust document and North Carolina law.

The Trust Document Comes First

When it comes to trustee compensation, the trust agreement itself always controls. Most trust documents include a compensation clause outlining how a trustee should be paid. This clause might specify:

• A fixed rate or formula for payment.
• A percentage of trust assets, capped or uncapped.
• A general authorization for “reasonable compensation.”

If the document sets a specific rate, the trustee must follow that structure. But if it only refers to “reasonable compensation,” the trustee has more flexibility—within limits. In that case, it’s up to the trustee to determine an appropriate rate based on the nature of the work, their experience, and what’s reasonable under the circumstances.

Reasonable Compensation and Beneficiary Notification

In North Carolina (and many states that have adopted the Uniform Trust Code), trustees must notify the trust beneficiaries of their intended rate of compensation. This ensures transparency and allows beneficiaries the opportunity to object if they believe the rate is excessive.

Trustees often choose one of two common methods for compensation:

1. Hourly Rate: The trustee sets an hourly rate, tracks their time, and pays themselves periodically based on hours worked.
2. Percentage of Trust Assets: Especially for professional trustees, it’s common to take a percentage—often around 1%—of the trust’s total value annually.

If beneficiaries object, or if a trustee wants to avoid the notice process altogether, North Carolina sets a statutory rate of 0.4% of the trust assets. This rate is considered automatically reasonable and doesn’t require beneficiary approval.

How and When Trustees Get Paid

Trustees are typically paid either annually, semiannually, quarterly, or monthly, depending on what the trust specifies and the trustee’s billing method. Payments come directly from the trust account in the form of a check or transfer.

Importantly, trustee compensation counts as ordinary income—it’s not a tax-free gift. Trustees should expect to receive a Form 1099 from the trust and report this income on their personal tax return.

Annual Accounting Responsibilities

Each year, trustees must provide an accounting to the beneficiaries that details trust activity, including any compensation paid to themselves. This requirement helps maintain transparency and ensures proper recordkeeping throughout the trust administration process.

Being a trustee is an important responsibility—not just legally, but financially. Understanding how compensation works helps you manage expectations, stay compliant, and maintain good communication with the beneficiaries.

Ready to start your trustee journey the right way? Start your estate planning journey today by calling our office at 919-659-8433 for a free discovery call and initial attorney consultation.

Or directly schedule a free discovery call at your convenience: calendly.com/caryep/discovery-call-get-started-cep-blog