diff --git a/CHANGELOG.md b/CHANGELOG.md
index a366f96fb..1612f083f 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -6,6 +6,7 @@ FEATURES:
 
 * Add CacheContext
 * Add auto sequencing to client
+* Add FeeHandler to ante handler
 
 BREAKING CHANGES
 
diff --git a/examples/basecoin/app/app.go b/examples/basecoin/app/app.go
index a1b94318a..ae60e8a73 100644
--- a/examples/basecoin/app/app.go
+++ b/examples/basecoin/app/app.go
@@ -36,6 +36,9 @@ type BasecoinApp struct {
 
 	// Manage getting and setting accounts
 	accountMapper sdk.AccountMapper
+
+	// Handle fees
+	feeHandler sdk.FeeHandler
 }
 
 func NewBasecoinApp(logger log.Logger, db dbm.DB) *BasecoinApp {
@@ -69,11 +72,14 @@ func NewBasecoinApp(logger log.Logger, db dbm.DB) *BasecoinApp {
 		AddRoute("ibc", ibc.NewHandler(ibcMapper, coinKeeper)).
 		AddRoute("simplestake", simplestake.NewHandler(stakeKeeper))
 
+	// Define the feeHandler.
+	app.feeHandler = auth.BurnFeeHandler
+
 	// Initialize BaseApp.
 	app.SetTxDecoder(app.txDecoder)
 	app.SetInitChainer(app.initChainer)
 	app.MountStoresIAVL(app.capKeyMainStore, app.capKeyAccountStore, app.capKeyIBCStore, app.capKeyStakingStore)
-	app.SetAnteHandler(auth.NewAnteHandler(app.accountMapper))
+	app.SetAnteHandler(auth.NewAnteHandler(app.accountMapper, app.feeHandler))
 	err := app.LoadLatestVersion(app.capKeyMainStore)
 	if err != nil {
 		cmn.Exit(err.Error())
diff --git a/examples/democoin/app/app.go b/examples/democoin/app/app.go
index db2614bad..151241d14 100644
--- a/examples/democoin/app/app.go
+++ b/examples/democoin/app/app.go
@@ -40,6 +40,9 @@ type DemocoinApp struct {
 
 	// Manage getting and setting accounts
 	accountMapper sdk.AccountMapper
+
+	// Handle fees
+	feeHandler sdk.FeeHandler
 }
 
 func NewDemocoinApp(logger log.Logger, db dbm.DB) *DemocoinApp {
@@ -79,11 +82,14 @@ func NewDemocoinApp(logger log.Logger, db dbm.DB) *DemocoinApp {
 		AddRoute("ibc", ibc.NewHandler(ibcMapper, coinKeeper)).
 		AddRoute("simplestake", simplestake.NewHandler(stakeKeeper))
 
+	// Define the feeHandler.
+	app.feeHandler = auth.BurnFeeHandler
+
 	// Initialize BaseApp.
 	app.SetTxDecoder(app.txDecoder)
 	app.SetInitChainer(app.initChainerFn(coolKeeper, powKeeper))
 	app.MountStoresIAVL(app.capKeyMainStore, app.capKeyAccountStore, app.capKeyPowStore, app.capKeyIBCStore, app.capKeyStakingStore)
-	app.SetAnteHandler(auth.NewAnteHandler(app.accountMapper))
+	app.SetAnteHandler(auth.NewAnteHandler(app.accountMapper, app.feeHandler))
 	err := app.LoadLatestVersion(app.capKeyMainStore)
 	if err != nil {
 		cmn.Exit(err.Error())
diff --git a/types/handler.go b/types/handler.go
index 129f42647..679a3b1a7 100644
--- a/types/handler.go
+++ b/types/handler.go
@@ -3,5 +3,8 @@ package types
 // core function variable which application runs for transactions
 type Handler func(ctx Context, msg Msg) Result
 
+// core function variable which application runs to handle fees
+type FeeHandler func(ctx Context, tx Tx, fee Coins)
+
 // If newCtx.IsZero(), ctx is used instead.
 type AnteHandler func(ctx Context, tx Tx) (newCtx Context, result Result, abort bool)
diff --git a/x/auth/ante.go b/x/auth/ante.go
index 6801769a4..c7af7e2d9 100644
--- a/x/auth/ante.go
+++ b/x/auth/ante.go
@@ -11,7 +11,7 @@ import (
 // NewAnteHandler returns an AnteHandler that checks
 // and increments sequence numbers, checks signatures,
 // and deducts fees from the first signer.
-func NewAnteHandler(accountMapper sdk.AccountMapper) sdk.AnteHandler {
+func NewAnteHandler(accountMapper sdk.AccountMapper, feeHandler sdk.FeeHandler) sdk.AnteHandler {
 	return func(
 		ctx sdk.Context, tx sdk.Tx,
 	) (_ sdk.Context, _ sdk.Result, abort bool) {
@@ -74,6 +74,7 @@ func NewAnteHandler(accountMapper sdk.AccountMapper) sdk.AnteHandler {
 				// TODO: min fee
 				if !fee.Amount.IsZero() {
 					signerAcc, res = deductFees(signerAcc, fee)
+					feeHandler(ctx, tx, fee.Amount)
 					if !res.IsOK() {
 						return ctx, res, true
 					}
@@ -156,3 +157,7 @@ func deductFees(acc sdk.Account, fee sdk.StdFee) (sdk.Account, sdk.Result) {
 	acc.SetCoins(newCoins)
 	return acc, sdk.Result{}
 }
+
+// BurnFeeHandler burns all fees (decreasing total supply)
+func BurnFeeHandler(ctx sdk.Context, tx sdk.Tx, fee sdk.Coins) {
+}
diff --git a/x/auth/ante_test.go b/x/auth/ante_test.go
index 2f90701e6..58633ff9a 100644
--- a/x/auth/ante_test.go
+++ b/x/auth/ante_test.go
@@ -72,7 +72,7 @@ func TestAnteHandlerSigErrors(t *testing.T) {
 	cdc := wire.NewCodec()
 	RegisterBaseAccount(cdc)
 	mapper := NewAccountMapper(cdc, capKey, &BaseAccount{})
-	anteHandler := NewAnteHandler(mapper)
+	anteHandler := NewAnteHandler(mapper, BurnFeeHandler)
 	ctx := sdk.NewContext(ms, abci.Header{ChainID: "mychainid"}, false, nil)
 
 	// keys and addresses
@@ -113,7 +113,7 @@ func TestAnteHandlerSequences(t *testing.T) {
 	cdc := wire.NewCodec()
 	RegisterBaseAccount(cdc)
 	mapper := NewAccountMapper(cdc, capKey, &BaseAccount{})
-	anteHandler := NewAnteHandler(mapper)
+	anteHandler := NewAnteHandler(mapper, BurnFeeHandler)
 	ctx := sdk.NewContext(ms, abci.Header{ChainID: "mychainid"}, false, nil)
 
 	// keys and addresses
@@ -179,7 +179,7 @@ func TestAnteHandlerFees(t *testing.T) {
 	cdc := wire.NewCodec()
 	RegisterBaseAccount(cdc)
 	mapper := NewAccountMapper(cdc, capKey, &BaseAccount{})
-	anteHandler := NewAnteHandler(mapper)
+	anteHandler := NewAnteHandler(mapper, BurnFeeHandler)
 	ctx := sdk.NewContext(ms, abci.Header{ChainID: "mychainid"}, false, nil)
 
 	// keys and addresses
@@ -216,7 +216,7 @@ func TestAnteHandlerBadSignBytes(t *testing.T) {
 	cdc := wire.NewCodec()
 	RegisterBaseAccount(cdc)
 	mapper := NewAccountMapper(cdc, capKey, &BaseAccount{})
-	anteHandler := NewAnteHandler(mapper)
+	anteHandler := NewAnteHandler(mapper, BurnFeeHandler)
 	ctx := sdk.NewContext(ms, abci.Header{ChainID: "mychainid"}, false, nil)
 
 	// keys and addresses
@@ -291,7 +291,7 @@ func TestAnteHandlerSetPubKey(t *testing.T) {
 	cdc := wire.NewCodec()
 	RegisterBaseAccount(cdc)
 	mapper := NewAccountMapper(cdc, capKey, &BaseAccount{})
-	anteHandler := NewAnteHandler(mapper)
+	anteHandler := NewAnteHandler(mapper, BurnFeeHandler)
 	ctx := sdk.NewContext(ms, abci.Header{ChainID: "mychainid"}, false, nil)
 
 	// keys and addresses