The successor trustee plays an important role after the death of the founder of the trust, as the successor trustee takes on the responsibility of managing and settling the trust instead of the founder. This person is also known as the successor trustee in cases where the founder is unable to manage the trust due to mental incapacity.
Responsibilities of the Successor Trustee
The successor trustee is responsible for settling the trust or continuing to manage it after the founder’s death. The successor trustee must take several steps to achieve this:
1. Identify and protect the assets of the trust.
2. Gather life insurance documents and retirement accounts where the successor trustee has been named the primary beneficiary.
3. Coordinate with the personal representative or legal executor of the estate if court action is needed.
4. Obtain the date of death value for the trust assets, including real estate valuations and business interests.
5. Identify your creditors and pay outstanding debts.
6. Determine income tax or estate tax obligations.
7. Prepare and file all required income tax and estate tax returns.
8. Pay ongoing administrative expenses of the trust until it is completed and the remaining property can be distributed to beneficiaries.
9. Provide the necessary cash liquidity to pay debts, ongoing administrative expenses of the trust, and income tax and estate tax obligations.
10. Invest and manage the trust assets until they are distributed to the beneficiaries.
Choosing a Successor Trustee
Ensure that the person you choose to be the successor trustee is capable of fulfilling these responsibilities. Taking on the role of a successor trustee is a significant responsibility and often a time-consuming burden. It is important to choose the right person or name an institution such as a bank for this task. You might consider working with an estate planning attorney to guide you.
It is also important to name one or more “backup trustees” in case the first person chosen is not available to serve.
Note: Do not name someone without speaking to them first to ensure they are willing to accept the role.
How to Appoint a Successor Trustee
The successor trustee must be named in your trust formation documents. Their specific duties depend on the terms you specify for the trust in these documents, known as the trust agreement.
You may direct that all assets and properties held in the trust be transferred to the beneficiaries upon your death. You may also specify that the trust should be closed after your death.
Note: The successor trustee is obligated to follow these directives and any other guidelines you specify.
You may want the trust to remain in effect after your death in certain cases. This is often done when the trust holds properties for the benefit of your minor children. Minors cannot legally own property, so the trust will continue to hold it until they reach the age you designate.
The successor trustee will make distributions from your trust for their care in accordance with your instructions. They will oversee these distributions and manage the assets held in the trust to ensure sufficient income generation continues.
Inheritance Issues
Revocable living trusts are one way that you can avoid probate. Probate is a lengthy and costly legal procedure that determines how your assets will be distributed after your death.
You may wish to create a transfer-on-death trust to transfer assets not held by the trust to the trust at the time of your death. This requires the probate process. Each state has specific probate rules. An estate attorney can assist you with this.
Frequently Asked Questions
Can I reclaim my assets if I place them in the trust?
The founder of a revocable living trust can reclaim assets or completely revoke the trust as long as it is revocable and the founder is mentally competent. This does not apply to irrevocable trusts.
Can the successor trustee make trust decisions on their own or must they follow my wishes?
The successor trustee is legally bound to manage the trust and its assets according to the terms of the trust agreement. They can make investment decisions if necessary, but only if you are unable to do so.
Is it possible…
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Sources:
– Klenk Law. “Irrevocable Trusts: Everything You Need to Know.”
– Superior Court of California, County of Santa Clara. “Probate Trusts,” #5. What Does a Trustee Need to Do When the Settlor Dies?
– Fiduciary Trust International. “The Benefits and Shortcomings of Revocable Trusts.”
– The Greene Law Firm. “How Long Can a Trust Remain Open After Death?”
– American Bar Association. “The Probate Process.”
– Superior Court of California, County of Alameda. “Living Trusts – If I Have a Living Trust, Do I Still Need a Will?”
– Association of the Bar of the City of New York. “Living Trusts—Revocable & Irrevocable.”
– National Law Review. “They Are Willing to Serve, But What Do My Trustees Do?”
Source: https://www.thebalancemoney.com/what-does-a-successor-trustee-do-after-you-die-3505389
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