January Series: Things You Need to Know as Successor Trustee

Being named as a successor trustee in someone’s revocable living trust document can be considered a great honor. But with that honor comes responsibility. Whether you were appointed to this role due to someone’s death or incapacity, we are here to assist you with understanding your role in the trust administration process and to offer you support each step of the way.

A revocable living trust (RLT) is a formal relationship in which the trustmaker names a trusted individual(a trustee) to hold and manage accounts and property for the trustmaker’s benefit and the benefit of others (beneficiaries). When people talk about a trust, they are usually referring to the legal document that puts this relationship in writing. This document is effective during the trustmaker’s lifetime, during any period of disability, and after death. Because the trust is created during the trustmaker’s lifetime, it is referred to as a “living” document, and because the trustmaker can change or terminate it at any time, it is called “revocable.”

A trustee is the person or entity responsible for managing, investing, and handing out the money and property owned by the trust. When a revocable living trust is created, the trustmaker is usually named as the initial trustee. This allows the trustmaker to maintain the same amount of control over and enjoyment of the trustmaker’s accounts and property as the trustmaker had before the trust was created, just in a different role. A successor trustee is a person or entity that has been named by the trustmaker to take over as trustee when the trustmaker can no longer act as trustee, whether due to disability, death, or a voluntary desire to have someone else manage the trust’s accounts and property.

As previously mentioned, a trustee is responsible for managing, investing, and handing out the trust’s accounts and property to the appropriate parties at the appropriate times. There are several responsibilities you may need to carry out when acting as successor trustee:

● Locate the relevant estate planning documents. These documents will be important to prove your authority to act and to understand what the trustmaker has instructed you to do.

● Collect important documents such as insurance policies, real estate deeds, car titles, bank and investment account statements, and tax returns.

● Meet with your loved one’s professional advisor team (estate planning attorney, tax professional, financial advisor, etc.) to plan the strategy for administering the trust and to prepare the legal documents needed to carry out that plan.

● Create a list of debts, creditors, and current expenses. Now that you are managing the trust account, you must ensure that all bills get paid.

● Make a list of the trust beneficiaries and heirs-at-law and their addresses. Work with an attorney to determine what type of notice each person is entitled to, as well as how and when this notice will be given.

● Prepare a list of all of your loved one’s property, accounts, jewelry, and other valuables. The items owned by the trust are now your responsibility. You must know where they are, how much they are worth, and adequately protect them from loss or damage.

● Maintain the trust accounting—that is, keep a record of all deposits, expenses, and transfers from the trust (even if they are to or for the benefit of your loved one).

A trustee also has some important duties that you should be aware of:

● Duty to administer the trust. The trustee must follow the terms and purposes of the trust document and act in good faith.

● Duty of loyalty. The trustee must administer the trust solely in the best interests of the beneficiaries unless the trust document allows for something different, or unless a specific transaction is approved by a court or consented to by the trust beneficiaries.

● Duty of impartiality. When there is more than one trust beneficiary, the trustee must act impartially with regard to each beneficiary’s interest in the trust property; and although “impartial” does not necessarily mean “equal,” a trustee must still carefully avoid showing favoritism between beneficiaries.

● Duty to control and protect trust property. A trustee has a duty to secure real property, change locks, and take similar protective measures. The trustee must physically secure personal property to avoid damage or loss. A trustee must also inform financial institutions of the trustee’s authority to control the trust assets titled in the name of the trust.

Accepting the role of successor trustee can seem a little intimidating when you look at the job description. However, you are not alone. Your advisor team (trust administration attorney, certified public accountant (CPA), financial advisor, and insurance agent) can guide you through the various steps of the administration process. If you are feeling overwhelmed, you may want to consider delegating trust administration tasks to another person with comparable, more advanced, or specialized skills such as an attorney, CPA, or financial advisor. Also note, services completed on behalf of the trust can be charged to the trust, not to you personally.