If you have a revocable living trust, you probably named yourself as the initial trustee so you can continue to manage your financial affairs. Eventually someone else will need to step in when you are no longer able to act due to incapacity or after your death, however. Your successor trustee plays an important role in the effective implementation of your estate plan.
Responsibilities of a Successor Trustee
At incapacity. If you become incapacitated, your successor trustee will step in and take full control of your trust for you, making financial decisions, selling or refinancing property, and completing other tasks related to your trust's accounts and property. Your successor may also be involved in paying bills and helping to ensure you get any care you may need. Since your trustee can only manage accounts and property that the trust owns, it is important that you fully fund your trust (i.e., transfer or retitle your accounts and property into your trust).
After death. After you die, your successor trustee acts similar to an executor of an estate. The successor trustee takes an inventory of your accounts and property, pays your final bills, sells property if necessary, has your final tax returns prepared, and distributes your accounts and property according to the instructions in your trust. Like incapacity, the successor trustee is limited to managing accounts and property that are owned by the trust, so fully funding your trust is crucial.
Your successor trustee typically acts without court supervision, which is why your affairs can be handled privately and efficiently—and probably one of the reasons you have a living trust in the first place. But this also means it will be up to your successor trustee to get things started and keep them moving along.
An Important Consideration
Your successor trustee can do anything you could with your trust accounts and property, as long as it does not conflict with the instructions in your trust document and does not breach the successor trustee's fiduciary duty.
It is not necessary for the successor trustee to know exactly what to do and when, because an attorney, certified public accountant, or other advisor can help guide your successor trustee, but it is important that you name someone who is responsible, conscientious, and willing to seek professional guidance when it is warranted.
Who Can Be a Successor Trustee
A successor trustee can be an adult child, family member, trusted friend, or professional or corporate trustee (bank trust department or trust company). If you choose an individual, you should name multiple back-ups in case your first choice is unable or unwilling to act.
What You Need to Know
Your successor trustee should be someone you know and trust, whose judgment you respect, and who will also respect your wishes.
When choosing a successor, keep in mind the type and amount of accounts and property in your trust and the complexity of the provisions in your trust document. For example, if you plan to keep accounts and property in your trust for your beneficiaries after you die, your successor trustee will have more responsibilities for a longer period of time than if your accounts and property will be distributed all at once upon your death.
- Consider the qualifications of your candidates, including personalities, financial or business experience, and time available due to family or career demands. Being a trustee can take a substantial amount of time and requires a certain amount of business sense.
- Be sure to ask the people you are considering if they would want this responsibility. Do not just assume they want to take on this role.
- Trustees should be paid for their work; your trust document should provide for fair and reasonable compensation.
- Because successor trustees have a lot of responsibility, they should be chosen carefully.
- Successor trustees can be an adult child, family member, trusted friend, or a corporate or professional trustee.
Rest assured, we can help you select, educate, and advise your successor trustees. You are not alone! If you have any questions or concerns, please feel free to schedule an appointment with us.