You must name a successor trustee when you set up your revocable living trust, someone to step in and administer and settle your trust for you after your death. This person would also be called upon to serve should you become mentally incapacitated.
The person making a revocable trust often acts as the trustee. This is in contrast to an irrevocable trust, where someone else must be appointed to this position. A successor trustee waits in the wings to take over your revocable trust when you can no longer manage the trust yourself.
- The creator of a revocable living trust can and often does act as trustee to manage it during their lifetime.
- A successor trustee is named by the creator of a revocable living trust to take over at a point when the creator can no longer manage it, either due to death or incapacitation.
- The successor must deal with a long list of responsibilities and duties upon taking over management of the trust.
- It’s crucial to make sure that the individual or entity you name is willing to take on the job.
Responsibilities of a Successor Trustee
Your successor trustee is responsible for settling your trust or continuing to manage it for you after your death. The successor must take several steps to accomplish this:
- Locating and protecting your trust assets
- Collecting life insurance policies, annuities, and retirement accounts on which your revocable living trust has been named the primary beneficiary
- Coordinating with the personal representative or executor of your estate if probate is necessary
- Obtaining the date of death values for your trust assets, including appraisals of real estate and business interests
- Identifying your creditors and paying off these debts
- Determining your income tax or estate tax liabilities
- Preparing and filing all required income tax and estate tax returns
- Paying the ongoing expenses of administering your trust until it is terminated and its remaining property can be distributed to your beneficiaries
- Raising the cash necessary to pay off your debts, the ongoing expenses of administering the trust, and income tax and estate tax liabilities
- Investing and managing your trust assets until they can be distributed to your beneficiaries
Choosing Your Successor Trustee
Make sure that the individual you choose to act as your successor is capable of carrying out these duties. Serving as a successor trustee is a huge responsibility, and it's often a time-consuming burden. It's important to choose the right person or name an institution like a bank for the job. Think about working with an estate planning attorney to guide you.
It's important to name one or more "backup" trustees as well, in case your first choice isn't available to serve.
Don't name someone without speaking with them first so you can be sure they're willing to accept the job.
How To Appoint Your Successor Trustee
Your successor trustee must be named in your trust formation documents. Their exact duties will depend on the terms you set for your trust in these documents, referred to as the trust agreement.
You might direct that all assets and property held in the trust be transferred to beneficiaries when you die. You might further state that the trust should then be closed.
Your successor trustee is obligated to follow these and any other directives you establish.
You might want your trust to remain up and running after your death in some cases. This is often done when it's holding property for the benefit of your minor children. Minors can't legally own property, so your trust would continue to hold it for them until they reach an age you specify.
Your successor trustee would make distributions to their guardian for their care per your instructions. They would oversee these distributions and manage the assets held in your trust to ensure that they continue to generate sufficient income.
Revocable living trusts are one way that you may avoid probate. Probate is a lengthy and costly court proceeding that determines the deposition of your assets after your death.
You might want to create a pour-over will to move assets not held in the trust into your trust at the time of your death. This process would require probate. Each state has specific rules for probate. An estate attorney can help you in this regard.
Frequently Asked Questions (FAQs)
Can I take my assets back if I put them in a trust?
The creator of a revocable living trust can take assets back or even close down the trust entirely as long as the trust is revocable and they're still mentally competent. This isn't the case for irrevocable living trusts.
Can my successor trustee make trust decisions on their own or do they have to follow my wishes?
Your successor is legally obligated to handle your trust and its assets according to the terms of your trust agreement. They can make investment decisions if necessary, however, if you're not able to do so.