Choosing the Right Successor Trustee for Your Revocable Living Trust
When a family establishes a revocable trust, it must name a successor trustee if the initial trustee dies or is mentally unable to manage the trust. Because most grantors manage their own trusts, a successor trustee waits as a backup should anything happen.
Choosing the right successor trustee and assembling a trustworthy team ensures that your wealth is handled appropriately when the time comes.
What is a Successor Trustee?
A successor trustee is a person who will step in for the primary trustee when they are unable to manage or execute the trust themselves. The successor trustee works to settle the trust or continue its management according to the terms of the trust.
If the beneficiaries of the trust are minor children, you may wish to have the successor trustee continue the management of the trust until the children are old enough to receive a distribution. The successor trustee oversees distributions to the children’s guardians and ensures that the trust continues to grow and generate income if necessary.
If the trust directs that assets be distributed to the beneficiaries and the trust closed, then the successor trustee is responsible for seeing that through and following necessary directives.
Other Responsibilities of Successor Trustees
The duties of the successor trustee vary depending on whether the primary trustee becomes incapacitated or dies. Here’s what to expect as a successor trustee depending on the situation.
If the Primary Trustee Becomes Incapacitated
If the primary trustee becomes incapacitated, the successor trustee is responsible for performing duties regarding their care including;
- Overseeing the grantor’s care
- Looking after minors and dependents named in the trust
- Contacting insurance companies
- Recruiting outside help from lawyers and advisors concerning investments
If the Primary Trustee Dies
Upon the death of the primary trustee, the successor trustee either executes or manages the trust depending on the directive. Sometimes a trust is managed and used to care for minors. When this happens, the successor trustee continues to operate the trust until it’s time to distribute assets to beneficiaries.
If the trust is distributed upon the death of the grantor/trustee, the successor may be responsible for the following:
- Paying off creditor debts
- Working with the executor and managing probate if necessary
- Collecting all assets for which name the trust beneficiary, including life insurance policies, retirement accounts, etc.
- Determining estate and income tax obligations
- Locating and protecting all assets within the trust
- Preparing and filing all tax returns associated with the trust
Choosing a Successor Trustee
The office of a successor trustee is a huge responsibility and can be a burden. Choosing a person or entity who is willing to accept the job is essential. Families should also name a backup successor trustee in case their first choice is unavailable to do the job.
Exact knowledge of how to execute or manage a trust is not necessary for a successor trustee. However, it is crucial for the successor trustee to be responsible and competent in trust matters.
Many families choose to appoint a corporate trustee or trust company such as Alliance Trust Company of Nevada as successor trustee. This option ensures professional management of the trust by an entity who will always work in the best interest of all parties.
A family’s choice of trustee could also be dependent on the size and complexity of the trust. More assets and provisions will always mean more work for the trustee. Sometimes a trust remains intact after the death of the primary trustee to benefit minors or other beneficiaries. A corporate trustee may be preferable in these situations as there are more responsibilities over a more extended period.
Considerations Before Appointing a Successor Trustee or Corporate Trustee
Always be sure to ask a trusted friend or family member if they are willing to take on the role and responsibility of becoming a successor trustee. Do not assume that someone is willing to take on this role as it is time-consuming and labor-intensive.
Finally, don’t forget to include fair compensation for a successor trustee who takes on this role. If you’re avoiding the use of a corporate trustee due to cost, remember that a family member or friend who takes on this role should not be doing it for free either.