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Who Should Be Your Successor Trustee | Danielle Hasty

Getting to the nitty gritty right from the start, I will begin with the idea that no one wants to think about their own death or the thought of being incapacitated and no longer able to handle one’s affairs.  The reality, however, is that these hard facts of life cannot be avoided, but fortunately you can be a little more prepared for them, at least as far as a trust is concerned.    The first step is the realization that you need a back-up plan should something happen to you – enter the successor trustee.

Choosing your successor trustee can be a difficult decision: there are many things to consider.  If you are currently the trustee of your revocable living trust, then you should begin to consider who will eventually fill that role when you are no longer able.  This is a decision that must be given ample consideration, because the successor trustee will have a lot of responsibility and could potentially impact the trust itself.

To choose an appropriate successor trustee, you must first understand the duties required of this individual.  So what does the successor trustee do?   Let’s say that you become incapacitated, the successor trustee can step in and handle all your financial affairs including paying bills, selling or refinancing assets, and making any other financial decisions.

Upon your death, the duties of the successor trustee become those of an executor, handling the settlement of your estate. The successor trustee will have the duty to file final tax returns, handle any “unfinished business”, and distribute property to beneficiaries as indicated by the trust agreement.

Another common question:  who is allowed to be a successor trustee?  A successor trustee can be an individual (your kid, your best friend, your mail man, etc.), a corporate trustee (bank trust department or a trust company), or a mixture (co-trustees). There are pros and cons to each, it depends on the size and the length of your trust.  In any case, it needs to be someone you trust.  Also, because the successor trustee also acts as an executor in most cases, the court will not be overseeing the disposition of your estate upon your death, so the person or entity you choose must be able to wade through the process.   The successor trustee you chose must have the time to devote to the process of settling your estate and be able to understand all the steps in completing it.  

Individuals, such as an adult son or daughter, or even a close family friend, can be good successor trustees for many reasons. You usually have a close relationship with that person, so you know they can be trusted, and you feel that they understand your wishes. They typically will know everyone involved in the trust, the other beneficiaries, and they also know of assets and where things are.

Choosing an individual, however, can have its pitfalls. There are often issues of unfairness in distributions, and if you have a large trust or a difficult trust to administer, it could be too much for a person to handle that has a life outside of your financial affairs. It can also be hard for the successor trustee to wrap up your estate upon your death – they may not understand all that is required and something could potentially fall through the cracks.

The areas that tend to cause problems for the individual are where the corporate trustee shines.  Because this is their job and expertise, they know and are willing to handle large and complicated trusts. They know the ins and outs of estate settlement, and they are unbiased when it comes to any possible family dramatics.  However some problems with a corporate trustee can be the inability to form a relationship or meaningful connection with beneficiaries to be able to administer the trust with your original intent.

Basically, when it’s time to make this decision and start thinking about these issues, it’s not going to be easy – there are a lot of things to consider, and there are a lot of people to place within your consideration.  You should talk to the people involved in your trust and get opinions from professionals. Feeling confident in your decision is the best you can do, and knowing you will leave your trust and legacy in good hands is something that is serious and important.  Whoever you choose, be sure to discuss it with them so that they know what they are getting themselves into. Choosing the right successor trustee will put your mind at ease, and ensure the trust gets carried out in the manner that was intended.

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