Who Should Be Your Successor Trustee?
April 28, 2017
By Cory Howes
If you have a revocable living trust, you probably named yourself as trustee so you can continue to manage your own financial affairs. Eventually, someone will need to step in for you when you are no longer able to act due to incapacity or after your death. The successor trustee plays an important role in the effective execution of your estate plan. Because successor trustees have a lot of responsibility, they should be chosen carefully.
Responsibilities of A Successor Trustee
At Incapacity: If you become incapacitated, your successor will step in and take full control of your trust for you, making financial decisions involving trust assets, even selling stocks or refinancing real estate mortgages, as well as other tasks related to your trust’s assets. Since your trust can only directly control assets that it owns, it’s vitally important that you fully fund it. Your successor may also be involved in paying bills and helping to ensure you get the care you need.
After death: After you die, your successor acts just like an executor of an estate would, taking an inventory of your assets, paying your final bills, selling assets if necessary, having your final tax returns prepared, and distributing your assets according to the instructions in your trust. Like incapacity, the successor trustee is limited to managing assets that are owned by the trust, so fully funding your trust is vitally important.
Your successor trustee will be acting without court supervision, which is why your affairs can be handled privately and efficiently. This is 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 to get things started and keep them moving along.
What You Need to Know
Your successor will be able to do almost anything you could with your trust assets, if it does not conflict with the instructions in your trust document and does not breach fiduciary duty.
It isn’t necessary for the successor trustee to know exactly what to do and when, because your attorney, accountant, and other advisors can help guide him or her along the way. However, it’s important that you name someone who is responsible and conscientious.
Who Can Be Successor Trustees
Successor trustees can be your spouse or adult children, other relatives, a trusted friend and/or a professional or corporate trustee (bank trust department or trust company). If you choose an individual, you should name more than one in case your first choice is unable to act.
What You Need to Know
Candidates for the role of successor trustee should be people you know and trust, people whose judgment you respect and who will also respect your wishes. When choosing a successor, keep in mind the type and amount of assets in your trust and the complexity of the provisions in your trust document.
For example, if you plan to keep assets in your trust after you die for your beneficiaries, your successor would have more responsibilities for a longer period than if your assets will be distributed all at once.
Consider the qualifications of your candidates, including personalities, financial or business experience, and time available due to their own family or career demands. Taking over as trustee for someone 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. Don’t put them on the spot and just assume they want to do this. Furthermore, trustees should be paid for their work; your trust document should provide for fair and reasonable compensation.
Rest assured, we can help you select, educate, and advise your successor trustees. For trust administration and other estate planning needs, please feel free to contact me with any questions or to schedule a consultation.