What Does a Trustee Actually Do? Duties, Pay, Liability, and Why Families Hire Banks
The Million Dollar Question: In 2008, Princeton agreed to a settlement valued at roughly how much, after the family of a 1961 donor sued, accusing the university — acting as trustee of the gift — of spending it on purposes she never intended?
A) $10 million B) $40 million C) About $100 million D) Over $500 millionRead on for the answer.
A trustee is not an honorary title and not a favor you do for a sibling over a weekend. It is a job, defined by state trust law, that comes with a short list of legal duties, a right to get paid for doing it properly, and real personal liability for doing it badly — liability that applies just as fully to a 275-year-old university sitting on a nine-figure endowment as it does to an aunt holding a grandchild’s custodial account. This piece covers what the job actually involves: the duties every trustee owes, what the three common types of trustee cost, and what happens — to institutions as prestigious as Princeton — when a trustee gets it wrong.
What it is
A trustee is the person or institution that holds legal title to a trust’s property and administers it for the people the trust names as beneficiaries, under the terms the person who created the trust (the settlor or grantor) wrote down. That’s the whole job in one sentence, and it’s worth separating from two roles people routinely confuse it with. An executor administers a probate estate under a will — a one-time job that ends when the estate closes. A trustee administers a trust, which can run for years, decades, or (in a dynasty trust) more than a century, and the job doesn’t end until the trust itself does. And a trust protector is a different role entirely — an outside party some trusts name to remove or replace a trustee, or to adjust administrative terms, but who never holds the trust’s assets or makes day-to-day decisions about them.
The job scales from the trivial to the enormous, and both ends are legally the same role. At the small end, a parent might serve, unpaid, as trustee of a child’s $50,000 custodial trust. At the other end, in 1961 Charles and Marie Robertson gave Princeton $35 million to endow graduate study for government service, structured as a foundation with Princeton controlling four of seven board seats — making the university, functionally, the trustee of the gift. By 2002 the fund had grown past half a billion dollars, and the Robertson family had concluded that Princeton had spent decades using it for purposes Marie Robertson never intended. They sued. Six years and tens of millions of dollars in legal fees later, Princeton settled rather than let a court decide whether it had, as trustee, honored the terms of a gift. Hold that figure — the full answer is at the bottom of this piece.
Who uses it
Three distinct kinds of trustee cover nearly every trust in the country, and which one a family picks says a lot about what the trust is actually for.
A family member or friend, usually unpaid or paid only nominal statutory compensation, runs the large majority of revocable living trusts — the kind built mainly for probate avoidance and incapacity planning rather than tax or creditor protection. The Federal Reserve’s 2022 Survey of Consumer Finances found 6.2% of U.S. families held what it calls “other managed assets” — a category covering trusts “for which components were not separately reported” — and that share rises sharply with wealth, to 21.1% among the top net-worth percentile the Fed tracks. Most of those trustees are relatives.
A corporate trustee — a bank or dedicated trust company — takes over once a trust gets large, multi-generational, or politically delicate inside a family: blended families with competing beneficiaries, discretionary distribution standards that will require someone to say no to a relative, or assets complex enough to need professional administration rather than a well-meaning volunteer. Schwab, for instance, offers a tier aimed at trusts that need full administration plus investment management, and a lighter administration-only tier for families that want to keep their own investment manager.
An independent professional trustee — typically an attorney or a CPA who takes on the role as part of a practice, rather than a bank — sits between the other two: more neutral and more experienced than a relative, without a bank’s overhead or its impersonal scale. It’s a meaningfully smaller segment, but a common choice for families that want professional judgment without institutional distance.
Why they use it
The case for a family trustee is trust in the literal sense — someone who already knows the beneficiaries, understands the family’s situation, and can exercise judgment with real context, usually at no cost. The case for a corporate trustee comes down to four things a family member structurally cannot offer. Neutrality: a bank has no history with any beneficiary and nothing personal at stake in who gets more, which matters enormously once a trust has to say no to someone. Continuity: an institution doesn’t die, develop dementia, get divorced, or move overseas mid-administration — all things that have forced emergency trustee changes in real family trusts. Professional investment management, carried out under a formal fiduciary standard rather than a relative’s best guess. And insurance and bonding — a corporate trustee carries institutional liability coverage that an individual trustee almost never does, which matters a great deal given the next section.
A trust protector exists for a narrower reason: to give a trust a release valve without handing day-to-day control to anyone new. A family that wants a bank’s professionalism but worries about getting locked into one institution forever can name a protector with the power to fire and replace the trustee — oversight without administration.
How it works
Every trustee, family member or bank, owes the same core set of fiduciary duties, which come from state trust law built on the Uniform Trust Code framework most states have adopted. The duty of loyalty requires a trustee to act solely in the beneficiaries’ interest, with no self-dealing — a trustee cannot sell trust property to themselves, borrow from the trust, or otherwise put any outside interest ahead of the people the trust was written for. The duty to administer the trust according to its terms sounds obvious but is the duty most often broken in practice: a trustee who thinks a sibling-beneficiary “deserves more” and quietly skews distributions to compensate isn’t exercising judgment, they’re breaching the document. The duty to invest prudently — codified in nearly every state as some version of the Uniform Prudent Investor Act — requires a trustee to diversify, manage risk, and invest to suit the trust’s actual purpose, not to chase returns or play it so safe the trust produces no income for a beneficiary who’s entitled to some. And the duty to account and inform requires a trustee to keep beneficiaries reasonably updated and to provide a formal accounting on request — a duty with real teeth, since in many states a beneficiary’s window to sue over a disclosed transaction starts running only once it’s actually been disclosed; undisclosed problems can stay open far longer.
Oversight runs in layers above all of that. A beneficiary who believes a trustee has breached a duty can petition a court, and Virginia’s enactment of the Uniform Trust Code — representative of the uniform framework most states use — lets a court remove a trustee for a serious breach of trust, persistent unfitness or failure to administer effectively, damaging conflict among co-trustees, or (with all beneficiaries’ agreement) simply a substantial change of circumstances. For a charitable trust specifically, that same removal petition can come from the state attorney general, not just from a beneficiary — which is exactly how, in 2002, trustees of the $5 billion-plus Milton Hershey School Trust got stopped from selling the trust’s controlling stake in the Hershey chocolate company: the Pennsylvania Attorney General obtained a court injunction and the trustees abandoned the sale rather than fight it. A charitable trustee answers to the state, not only to the people the trust is meant to benefit.
What it costs
A family member serving as trustee usually takes nothing, though every state’s version of the Uniform Trust Code gives a trustee the right to “reasonable compensation” even without being asked — Virginia’s version, again representative of the broader framework, sets that as the default where the trust document is silent.
A corporate trustee’s fees are published and not small. SECU’s trust services fee schedule, effective April 2024, charges 1.25% on the first million, with a $250,000 account minimum and a $2,500 minimum annual fee — a $500,000 trust there pays $6,250 a year, or roughly $62,500 over a decade. Schwab’s published tiers run similarly: its full administration-plus-investment service starts at 0.50% of assets annually with a $5,000 minimum fee; its combined tier for clients with $10 million or more at Schwab starts at 0.70% with a $10,000 minimum; and administration-only, where the family keeps its own investment manager, starts at 0.40% with a $5,000 minimum. Other major bank trust departments price in a broadly similar range, though few publish a schedule as specific as SECU’s or Schwab’s — a detail worth asking for directly before naming one as trustee, not assuming from a brochure.
An independent professional trustee typically bills less than a bank’s full-service tier but more than nothing — often an hourly or flat annual fee negotiated directly, since there’s no published schedule to compare against.
Hidden costs and tradeoffs
A family trustee’s real cost rarely shows up as a dollar figure. It’s the unpaid time — gathering assets, filing fiduciary tax returns, keeping records good enough to survive a beneficiary’s request for an accounting — and the strain of being the relative who has to say no to another relative’s request for an early distribution, in writing, with reasons. It’s also liability exposure most family trustees never think to insure against: the same duties that bind a bank bind them, with none of the institutional coverage.
A corporate trustee’s hidden cost is fee drag compounded over a long trust term, plus a measure of impersonality that shows up exactly when a family needs flexibility — a bank trust officer following a conservative reading of the document isn’t going to improvise the way a relative who actually knows the beneficiary’s situation might. Many families split the difference: a corporate trustee for administration and investment discipline, paired with a family member as co-trustee for judgment calls, or a trust protector sitting above the whole arrangement with the power to replace the trustee if the relationship stops working.
What people get wrong
That being named trustee is purely an honor, with no real downside to accepting. It’s an unpaid job with personal liability attached the moment the appointment is accepted — not something to say yes to reflexively because a relative asked.
That a trustee can override the trust document when they think the result is unfair. They can’t. A trustee who substitutes their own judgment for the document’s actual terms, however good their intentions, is committing the exact breach that gets trustees removed and sued — the job is to administer the trust as written, not as the trustee wishes it had been written.
That size and prestige are proof of good oversight. A 275-year-old Ivy League university and a $5 billion charitable trust both ended up on the losing side of exactly the dispute this piece is about — being told, by a court or an attorney general, that a trustee hadn’t honored the obligation it was bound by.
That naming an institution as trustee means no one is watching it. The opposite is closer to true: a corporate or charitable trustee is watched by more parties, not fewer — beneficiaries, courts, and, for a charitable trust, the state attorney general — all of whom have standing to act if the trustee gets it wrong.
Bottom line
The answer is C: about $100 million. Princeton’s settlement with the Robertson family combined a $40 million reimbursement of the family’s legal fees, $50 million plus interest transferred to a new foundation for government-service education, and the university’s own uninsured defense costs — ending, 47 years after Marie Robertson’s original gift, a dispute over whether Princeton had honored her intent while acting as the fund’s trustee.
That’s the real shape of the role this piece covers. A trustee — family member, bank, or independent professional — takes on real fiduciary duties the moment they accept the job: loyalty to the beneficiaries, administration exactly as the document says, prudent investment, and honest accounting. Those duties come with a legal right to reasonable pay, a real price tag when a corporate trustee is hired instead, and genuine personal liability for getting it wrong — liability that doesn’t shrink just because the trustee happens to be one of the most respected institutions in the country. The actual decision a family is making, in choosing who serves, isn’t really “who do we trust” in the ordinary sense. It’s which tradeoff — cost, neutrality, personal liability, or institutional continuity — this particular trust can least afford to get wrong.
What this piece is, and what it is not. This explains the trustee’s role, duties, and typical compensation in general terms — not legal, tax, or financial advice, and not a recommendation for or against naming any particular person or institution as trustee. Trust and fiduciary law differ by state; the Virginia Uniform Trust Code citations here illustrate a representative enactment of a framework most states share, not a 50-state survey, and anyone naming or serving as a trustee should confirm the rules in their own state. The Robertson v. Princeton and Milton Hershey School Trust matters are drawn from each institution’s own public statements, court filings, and the published legal-academic and news sources cited below, not from any non-public source. Nothing here establishes an attorney-client or advisory relationship. Anyone making an actual trustee decision should take their own facts to a licensed estate-planning attorney in their own state. See Editorial Standards.
Methods and sources. The Robertson v. Princeton settlement figures — the $40 million reimbursement to the Robertson family’s Banbury Fund, the $50 million-plus-interest transfer to a new foundation, the dissolution of the Robertson Foundation, and the University’s uninsured defense costs — are from Princeton’s own December 2008 explanation of the settlement, corroborated by Princeton Alumni Weekly’s contemporaneous “Robertson settlement” coverage, which characterized the combined value at roughly $100 million. The 1961 gift amount, the foundation’s governance structure giving Princeton four of seven board seats, and the fund’s growth past $900 million are also from Princeton’s own account. The Milton Hershey School Trust’s 2002 attempted sale of its controlling stake in The Hershey Company, the Pennsylvania Attorney General’s intervention and injunction, and the trust’s abandonment of the sale are from Klick and Sitkoff’s “Agency Costs, Charitable Trusts, and Corporate Control: Evidence from Hershey’s Kiss-Off,” as summarized on Harvard Law School’s corporate governance blog. Trustee fiduciary duties — loyalty, administration per trust terms, prudent investment, and accounting — follow the Uniform Trust Code framework as enacted in Virginia, cited directly: removal grounds and the attorney general’s standing to petition for a charitable trust are Va. Code Section 64.2-759, the reasonable-compensation default is Va. Code Section 64.2-761, and court remedies and damages for breach are Va. Code Sections 64.2-792 and 64.2-793. These are cited as a representative state enactment of the uniform framework, not as binding outside Virginia. Corporate trustee fee figures are SECU’s Trust Services Fee Schedule, effective April 2024 (services provided through Members Trust Company), and Schwab’s published Personal Trust Services page. Trust prevalence by net-worth percentile is the Federal Reserve’s 2022 Survey of Consumer Finances, the same figures already verified for this site’s trust-fund pillar piece. This draft was checked line by line before publication: both named-institution dollar figures were traced to the institution’s own statement or to a peer-reviewed/legal-academic secondary source rather than to a single news aggregator, and no figure in this piece describes a private individual’s personal finances.
Related reading: What Is a Trust Fund? What It Does, What It Costs, and Who Actually Needs One · Trust vs. Will: What Each One Does, What Each One Costs, and When You Need Both · Revocable vs. Irrevocable Trust: Control, Taxes, Creditors, and the Trade You Are Actually Making · Trusts: How Wealth Is Held, Protected, and Passed On · Trust protector
