Responsibilities of Successor Trustees

Many people becoming trustees for the first time have asked questions such as “What is a trust?” or “What taxes must I pay as a trustee?” or “Am I required to file annual reports with a court?” Most people have had little experience with trusts.
Trustees

If you have a revocable living trust, you probably named yourself as trustee so you can continue to manage your own financial affairs. But eventually someone will need to step in for you when you are no longer able to act due to incapacity or after your death. Because successor trustees have a lot of responsibility, they should be chosen carefully.

If you become incapacitated, your successor will step in and take full control of your finances for you—paying bills, making financial decisions, even selling or refinancing assets. Your successor will be able to do anything you could with your trust assets if it does not conflict with the instructions in your trust document and does not breach fiduciary duty.

After you die, your successor acts just like an executor would—takes an inventory of your assets, pays your final bills, sells assets, if necessary, has your final tax returns prepared, and distributes your assets according to the instructions in your trust.  I have attached document explaining your Successor Trustee’s Responsibilities.  Click Here

You may also want to look at the do’s and don’ts I posted a while back here.

Your successor trustee will be acting without court supervision, which is why your affairs can be handled privately and efficiently—and probably one of the reasons you have a living trust in the first place. But this also means it will be up to your successor to get things started and keep them moving along. It isn’t necessary for this person to know exactly what to do and when because your attorney, CPA, and other advisors can help guide him or her, but it is important that you name someone who is responsible and conscientious.

Successor trustees can be your adult children, other relatives, a trusted friend, or a corporate trustee (bank trust department or trust company). If you choose an individual, you should name more than one in case your first choice is unable to act. They should be people you know and trust, people whose judgment you respect and who will also respect your wishes.

When choosing a successor, keep in mind the type and amount of assets in your trust and the complexity of the provisions in your trust document. For example, if you plan to keep assets in your trust after you die for your beneficiaries, your successor will have more responsibilities for a longer period of time than if your assets will be distributed all at once.

Also, keep in mind the qualifications of your candidates. Consider personalities, financial or business experience, and time available due to their own family or career demands. Taking over as trustee for someone can take a substantial amount of time and requires a certain amount of business sense.

Be sure to ask the people you are considering if they would want this responsibility. Don’t put them on the spot and just assume they want to do this. Finally, trustees should be paid for this work; your trust document should provide for fair and reasonable compensation.  Please take a look at estateplanning.com for this article and other great articles and information.

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