Choosing the right successor trustee can have a major impact on the long-term viability of your trust. When making the selection, you should consider a variety of factors, including whether you have a short-term or long-term distribution plan or if you are dealing with traditional and non-traditional assets.
Many people who establish a revocable living trust opt to name themselves as trustee so they retain the ability to manage their own financial affairs. However, it is inevitable that at some point in time, another individual will need to take over the management of your trust. This individual is known as a “successor trustee.” They can step in when you no longer have the capacity to manage the trust, or after you pass away. Selecting the right successor trustee is extremely important because they play an influential role in the effective and efficient execution of your estate plan.
What exactly is a successor trustee?
When a revocable living trust is formed, one the components is the appointment of a successor trustee. As mentioned, when you create the trust, you can serve as both the grantor (creator) and the trustee while you are alive. As the grantor and trustee, you have the right to move assets in and out of the trust, modify the terms of the trust and change beneficiaries. You also retain the right to remove people as beneficiaries.
When you pass on, or become incapacitated, your successor trustee will assume control over the trust and the responsibilities of trustee. These responsibilities typically include:
- Investing trust assets wisely until the time comes to transfer the assets to the beneficiaries.
- Handling the transfer of asserts to your beneficiaries.
- Ensuring the terms of the trust are respected and followed.
Having a living trust in place is a great benefit to you and your loved ones since it enables you to avoid dealing with the cost and inefficiencies associated with the probate court system. Your successor trustee will be empowered to manage the trust without having to obtain authorization from the court or report every action to a court.
How a successor trustee is different from an executor
Many people, quite understandably, get confused about the role of an executor and the role of a successor trustee. They are wholly different and distinct roles and have different responsibilities when it comes to administering an estate.
One of the biggest differences between an executor and a successor trustee is the duration of the role. An executor is empowered to handle the probate process immediately after you pass away. The executor will locate and collect your assets, as well as pay any outstanding debts and taxes. The executor is also obligated to report to the probate court and distribute your assets after your passing, according to smartasset.com.
On the other hand, with a successor trustee, they can serve in the role for months, years, or even decades. For example, if you want to leave your granddaughter an inheritance but don’t want her to receive it until she graduates from college, you can specify this requirement in your trust, and the successor trustee will be empowered to oversee and manage the trust until the granddaughter meets your established prerequisite. If your granddaughter is only 10 years old, this means your successor trustee will have that position for likely more than a decade.
Overview of the responsibilities for a successor trustee
Generally, your successor trustee will be able to 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.
If you become incapacitated, your successor trustee has the right to step in and take full control of the trust. They will make all financial decisions involving trust assets (including selling or refinancing assets, if necessary). Since your trust can only directly control assets that it owns, it is extremely important that you fully fund your trust and title your assets properly.
After you pass away, your successor trustee will take an inventory of your assets, pay any final bills, sell assets if necessary, prepare final tax returns, and distribute your assets according to the instructions in your trust.
Who to select as your successor trustee
This is an inherently personal decision and you have a tremendous amount of flexibility in naming a successor trustee. In fact, you can name virtually anyone, including an adult child, another relative, a trusted friend. Or, you can select a professional or corporate trustee.
Please note that if you choose an individual, like a family member or trusted friend, it is strongly recommended that you name more than one successor trustee, just in case your first choice is unable to act or pre-deceases you.
When selecting a successor trustee, it is important to evaluate the type and amount of assets in your trust and the complexity of the provisions in your trust document. The level of complexity in your trust may warrant naming a professional or corporate trustee. It is important to understand that taking over as successor trustee usually requires a significant amount of time and a level of business acumen since they will be empowered to invest and/or refinance trust assets. This is why you should consider the educational and professional experience of your candidates.
Speak with an attorney
If you are having a difficult time selecting a successor trustee, or just want some candid, unfiltered advice on making the best selection, consider speaking to an experienced trust and estate planning attorney.