The Importance of a Successor Trustee

An estate plan that includes a revocable living trust is an excellent way to protect yourself and your loved ones upon your passing or in the event you are unable to manage your own affairs. In contrast to other estate planning options, a revocable living trust gives you the ability to keep control of and enjoy your assets and property during your lifetime, to maintain privacy in how your assets are managed, and to avoid the delays and expense of going through probate.

To ensure that your estate plan works as it should when you are no longer capable of managing your own affairs, you should name a backup, or successor, trustee, who will step in to act when you are not able to do so yourself. It is important that your successor trustee understands their role, duties, and responsibilities, and where to go if help is needed.

When does a successor trustee take over?

A trustee is an individual or entity in charge of managing, investing trust property, and making distributions from the trust at the appropriate time and to the appropriate beneficiaries. You, and often your spouse, if you are married, will most likely act as the initial trustee of your revocable trust while you are able. However, there will likely come a time when you are no longer able to act as trustee, in which case, the person you have named as your successor trustee will need to step in.

When you are unable to make your own decisions. At some point, accident, illness, or the effects of aging may cause you to become incapacitated and unable to make decisions or handle the day-to-day tasks associated with managing, investing, or distributing trust assets. If you have named a reliable successor trustee, this individual or entity will be able to step in and make sure that the trust’s accounts and property continue to be managed, invested, and used for your wellbeing during your life, without court involvement. If you have any dependents, such as minor children, the trust can ensure that their needs are met as well.

At your death. When you pass away, your named successor trustee will step in to manage, invest, and use the trust’s money and property for the benefit of those you have chosen (your beneficiaries). If you have properly detailed your wishes in your trust, they will be carried out by the trustee, without court involvement.

Whenever you choose. There could come a time when you no longer want to be the one managing the trust’s accounts and assets. In this instance, you could choose to resign as the initial trustee, allowing your successor to step in and pick up where you left off. Or you could allow your successor trustee to act with you as a co-trustee. Because you are still alive, the successor trustee will be managing, investing, and using the trust’s accounts and property for your benefit and anyone you have named in your trust. Even if you have named a professional company as your successor trustee, allowing them to act while you are still alive and mentally aware can be a great way for you to see how the successor trustee handles the responsibility. So long as you are still mentally able to, and the trust allows for it, you can remove your successor trustee if they do not perform their duties well and replace them with someone else.

What are a successor trustee’s duties and responsibilities?

While controlling the trust’s accounts and assets, the successor trustee has legal duties and responsibilities that must be followed. In general, your successor trustee has a fiduciary duty to administer the trust solely in the interest of the beneficiaries and to deal with them impartially. As a fiduciary they are held to a higher standard of care. The successor trustee cannot use any of the trust’s accounts or assets for the trustee’s own benefit or for any purpose not expressly listed in the trust. Also, unless specifically authorized by the trust document, the successor trustee cannot enter into any transaction that would create a conflict of interest between the successor trustee and the trust or trust beneficiaries.

How can you prepare your successor trustee?

Make sure estate planning documents are up to date. Creating an estate plan is a great first step in making sure your wishes are carried out. However, it is crucial that you keep your estate plan up to date. Because your successor trustee will have to rely on the trust’s written terms, it is important that your trust reflects your current goals and wishes and any changes in the law.

Revocable Living Trust

When reviewing your trust, make sure that the individual or entity you have selected as your successor trustee is still the one you want and that the individual or entity can still act on your behalf. One or more alternates should be named in case your first choice for successor trustee becomes unable or unwilling to act. Lastly, review the beneficiaries of your trust and what they are to receive. Are the amounts and timing of property distributions still what you want? A beneficiary’s circumstances can change quickly, and it is important that your wishes be carried out as intended.

Financial Power of Attorney

It is important to review your financial power of attorney to make sure that the person named to handle accounts and assets owned by you individually is still able to act. In many cases, your successor trustee and agent under a financial power of attorney may be the same person, but if not, you will want to make sure that these two individuals can work well together should something unexpected happen in the future.

Healthcare Documents

Although healthcare documents (such as a healthcare power of attorney, advance directive or living will, and Health Insurance Portability and Accountability Act (HIPAA) authorization form) primarily focus on medical matters, they may impact the financial matters handled by the successor trustee. If you are expecting medical bills to be paid from accounts owned by the trust, it is important that your successor trustee have access under a HIPAA authorization form to receive your medical information and talk to the healthcare providers if any questions arise during the payment process. Additionally, you should review the other healthcare documents to make sure that they accurately reflect your wishes and to ensure that you have done a thorough review of all your estate planning documents.

Discuss your estate plan with your successor trustee. The next step in preparing your successor trustee is to discuss your estate plan with your successor trustee. Whether your successor trustee is a family member, close friend, or professional trustee, open and honest communication is necessary. 

If you want to keep a majority of the details private until your death, you can start the conversation by letting your loved one or corporate trustee know that you have chosen him or her to serve as the successor trustee of your trust, where to find the necessary documents, and which advisors (estate planning attorney, certified public accountant, financial advisor, or insurance agent) to contact when they begin to act for you. You should ensure that your named successor trustee is not surprised by their new role and then guide them with some steps to take.

If you are comfortable doing so, you could give your successor trustee a general overview of your estate plan and discuss who will receive the accounts and assets, without disclosing the exact amounts. The focus of this discussion should be to communicate the goals of your estate plan and alert your successor trustee to any special circumstances that may need to be addressed.

Lastly, if you have decided that you want your successor trustee to have full access to all information and to be ready to step in at a moment’s notice, you could sit down with your successor trustee and go through each of your documents. Depending on your comfort level, this may be a great time to get the rest of your loved ones involved. We are happy to sit in on these meetings to facilitate and answer any questions that may arise.

We Are Here to Help

Because we never know what the future holds, now is the best time to start having discussions with your successor trustee about your wishes and intentions. We are available for in-person or virtual meetings to help facilitate these discussions. Give us a call today, or schedule an appointment online, so we can help you and your loved ones prepare for the next phase of the estate planning process.