If you have a revocable living trust, you probably named yourself as trustee so you can continue to manage your own financial affairs, but eventually, someone will need to step in for you when you can no longer act due to incapacity or after your death. Your successor trustee plays an important role in the effective execution of your estate plan.
The Key Takeaways:
- Because successor trustees have a lot of responsibility, they should be chosen carefully.
- Successor trustees can be your adult children, other relatives, a trusted friend, or a corporate or professional trustee.
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 or refinancing assets, and other tasks related to your trust’s assets. Since your trustee can only manage assets that the trust owns, it’s vitally important that you fully fund your trust. Your successor may also pay bills and help to make sure you get the care you need.
After Death: After you die, your successor acts similar to an executor of an estate. The successor takes an inventory of your assets, pays your final bills, sell assets, has your final tax returns prepared, and distributes your assets according to the instructions in your trust. Like incapacity, the successor trustee is limited to managing assets owned by the trust, so fully funding your trust is vitally important.
Your successor trustee typically acts without court supervision, which is why your affairs can be handled privately and efficiently – and probably one reason you have a living trust. But this also means it will be up to your successor to start things and keep them moving along.
An Important Consideration
Your successor can do anything you could with your trust assets, as long as 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, CPA, and other advisors can help guide him or her, but you should name someone who is responsible and conscientious.
Who Can Be Successor Trustees
Successor trustees can be your adult children, other relatives, a trusted friend or a professional or corporate trustee (bank trust department or trust company). If you choose an individual, you should name more than one if your first choice is unable or unwilling to act.
What You Need to Know:
Your successor trustee should be someone you know and trust, someone whose judgment you respect and who will also respect your wishes.
When choosing a successor, remember 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 of time 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 substantial time and requires a certain amount of business sense.
- 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.
- Trustees should be paid for their work; your trust document should provide for fair and reasonable compensation.
We can help you select, educate, and advise your successor trustees. You are not alone. If you have any questions, please schedule an appointment with us.
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