Trust Administration?

Named As A Successor Trustee? Now What?

NamedAsSuccessorTrusteeNowWhat-MichaelHuguelet
Edited by Michael Huguelet

Your friend or loved one has written their revocable living trust — and they just named you as their Successor Trustee or Alternate Successor Trustee. We’ve prepared this short overview to help you understand what this means and answer some common questions.

(Note that if you were named as an Alternate Successor Trustee, then you will be asked to serve only if the person named as first-choice Successor Trustee is unable or unwilling to serve.)

What is a Revocable Living Trust?

Like a will, a revocable living trust is an estate planning tool that provides instructions about how the trust’s creator (known as the “Grantor”) wishes to distribute certain property after they’ve passed away. A living trust holds property that the Grantor has placed in it, and is managed at first by the initial “Trustee,” who is typically the Grantor.

What is a Successor Trustee?

A Successor Trustee is the person responsible for administering the trust after its Grantor either passes away or becomes “Incapacitated” – that is, unable to administer the trust for themselves. The Grantor’s instructions for how the trust should be administered are set out in a document called a “Declaration of Trust.” The Declaration of Trust will also describe the Successor Trustee’s responsibilities and powers.

What are a Successor Trustee’s Duties?

A Successor Trustee’s specific duties depend on the terms of the Declaration of Trust, local law, and whether the Grantor has passed away or is Incapacitated but still living. A general overview of typical Successor Trustee duties is provided below. Please note, however, that it is usually wise to speak with an estate planning attorney for assistance to learn exactly what will be required in your specific case. (Successor Trustees are entitled to reimbursement from the trust for the reasonable costs and expenses they incur in the course of their duties, and this typically includes the cost of necessary legal advice.)

It is important to note that Successor Trustee are obligated to administer the trust and exercise their powers for the benefit of the trust’s beneficiaries. Successor Trustees may not act for their own personal benefit unless the Declaration of Trust specifically authorizes it.

Successor Trustee Duties When the Grantor Has Passed

When the Grantor has passed away, the Successor Trustee is typically responsible for winding down the trust by distributing the property it holds in accordance with the Grantor’s instructions. Until all distributions have been completed, the Successor Trustee is also responsible for administering the trust property in a way that protects the trust property from waste and loss.

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Among other things, the Successor Trustee should typically:

  • Inform the Grantor’s family and loved ones that you are the Successor Trustee.
  • Provide copies of the Declaration of Trust to the beneficiaries named therein.
  • Obtain certified copies of the Grantor’s death certificate – these may be necessary to prove the Successor Trustee’s legal authority to administer the trust property.
  • Assemble information about the property held in the trust, and take any steps necessary to secure and protect it.
  • If the Grantor has placed bank accounts in the trust, notify the relevant banks so that you can have access to them.
  • Similarly, notify the Social Security Administration, life insurance companies, retirement plans, and any other organizations that will provide death benefits to the Grantor.
  • Coordinate with the Executor of the Grantor’s Will to pay any outstanding bills and taxes, using trust property. Be sure to keep receipts of these expenses paid.
  • If the Grantor’s Will is a “Pour-Over Will” thatnames the trust as the beneficiary of any remaining property that was not placed in the trust, coordinate with the Executor to have this property added to the trust, as well.
  • Close the Grantor’s accounts once they’re no longer needed. For example, credit card, phone and internet service accounts can typically be closed. However, you may want to keep utility accounts and insurance policies active to preserve the value of the assets they apply to.
  • Distribute the Grantor’s trust property to the beneficiaries specified in the Declaration of Trust. Instructions to distribute specific pieces of property to specific beneficiaries should be carried out first, before turning to general instructions regarding how remaining property should be distributed. (Note that you may need to conduct an estate sale to liquidate remaining assets into cash.)

Successor Trustee Duties When the Grantor is Incapacitated, but Still Living

When the Grantor is Incapacitated, but still living, the Declaration of Trust will typically direct the Successor Trustee to use the trust property to provide for the Grantor’s care and comfort while his or she remains alive. The Declaration of Trust may also instruct you to use trust property to provide for the Grantor’s family and loved ones.

As when the Grantor has passed away, Successor Trustees should typically:

  • Inform the Grantor’s family and loved ones that you are the Successor Trustee.
  • Assemble information about the trust property and take any steps necessary to secure and protect it.
  • Notify the bank and financial institutions that hold any accounts placed in the trust, so that you can have access to them.
  • Apply for any disability benefits that the Grantor might be entitled to.
  • Coordinate with the Grantor’s Agents under any Financial or Healthcare Powers of Attorney to conduct the Grantor’s business, pay outstanding bills and taxes, and ensure the Grantor receives the care he or she needs.
  • Keep records and receipts for any bills you’ve paid, and expenses you’ve incurred, in the course of your duties.

Do I have to serve as Successor Trustee?

No, being nominated does not obligate you to serve. When the time comes, you can decide whether to accept this responsibility or not. If you choose to decline, the next Alternate Successor Trustee named in the Declaration of Trust will have the opportunity to serve. If no alternative was named, the Declaration of Trust should specify how the next Successor Trustee will be selected. (If you are already certain that you are not willing to serve as the Successor Trustee, it is best to let the Grantor know as soon as possible, so that a willing Successor Trustee can be named instead.)

Note that even if you have decided to accept your nomination as Successor Trustee, you are generally not obligated to continue in this role indefinitely. The Declaration of Trust will set out the conditions on which you can step down as Successor Trustee and appoint a replacement.

What should I do now?

  • If the Grantor has not already notified you that you’ve been nominated to be a Successor Trustee, get in touch to discuss the specifics of their wishes and have a better idea of their expectations.
  • Ask the Grantor that named you where their original Declaration of Trust is going to be stored so that you’ll be able to find it.
  • Create or update your own will or trust. It’s quick, 100% free, and you can update it at any time.

These materials are intended as informational materials only, and are not a substitute for the advice of a qualified attorney.

Article reference:
https://www.freewill.com

About the author

Michael Huguelet

Coming from, and continuing in, a large family, Mike fully appreciates his clients’ desire to protect their hard earned legacies after they are gone, while at the same time, providing protection for their legacies during the rest of their lives, taking into account the issues of aging, health care and wealth management.