SUCCESSOR TRUSTEE: Roles and Responsibilities

successor trustee

The establishment of a Trust can serve to supplement your Estate Plan by adding an extra layer of protection to the distribution of your assets. Depending on your individual needs, there are numerous types of Trusts available, but most will require you to designate a Successor Trustee. The Successor Trustee, like the Executor of a Will, will oversee the Trust after your death.

Choosing a Successor Trustee, as well as being chosen for this job by a loved one, can be daunting. Whether you are considering who should be in charge of your Trust or have been appointed to administer someone else’s, understanding the job of a Successor Trustee can be beneficial. And that’s what this article is about.

What is a Successor Trustee?

A Successor Trustee is a person in charge of administering and settling a trust after its originator (known as the Grantor) dies. A successor trustee is also in charge of the trust if the grantor is incompetent or unable to make decisions. The particular obligations of a successor trustee will vary depending on the grantor’s instructions.

When establishing a Revocable Living Trust, the concept of a successor trustee is extremely important. In a living trust, the grantor is often the initial trustee until their death, but they will ultimately require a successor to take over. Grantors can appoint a close relative, a family friend, or even a financial institution to serve as a successor trustee.

A Grantor will identify their Successor Trustee in a document called a Declaration of Trust, which will also define their duty. In other situations, the Successor Trustee will be required to manage the Trust for several years, for example, if the beneficiaries are minor children who must reach the age of majority before assets can be distributed. As a result, the function of Successor Trustee is a significant and frequently time-consuming responsibility.

What Are the Typical Duties of a Successor Trustee?

Typical Successor Trustee responsibilities include Trust management and asset distribution, though the Grantor will determine the specifics. The Successor Trustee must act in the best interests of the Trust’s beneficiaries and cannot make choices for their own advantage (unless specified in the Trust). The Successor Trustee’s responsibilities will also change depending on whether the Grantor died or became incompetent.

If the Grantor dies, the Successor Trustee’s responsibility often begins with alerting family members, relatives, and financial institutions of the death. Beneficiaries must also be notified, and copies of the Declaration of Trust must be provided by the Successor Trustee. They must then work with the Will’s Executor to terminate any accounts and pay off any debts using the Trust. The Successor Trustee must then distribute property and assets to the appropriate beneficiaries and close the Trust when stated.

If the Grantor becomes incapacitated, the obligations of a Successor Trustee will change slightly. In these circumstances, the Successor Trustee will notify the Trust’s family and beneficiaries and then gather the appropriate Trust information. The Successor Trustee is also frequently in charge of locating and filing for disability benefits on behalf of the grantor. Documenting receipts, expenses, and conversations is also part of the job.

What Is Involved in the Selection of a Successor Trustee?

If you are appointed as a Successor Trustee, the first step is to meet with the Trust’s Grantor to outline your obligations. The Grantor will also go through the Declaration of Trust with you and tell you where it is stored (along with any other important documents). At this point, they will tell you of their expectations and provide you with a greater understanding of your specific responsibilities.

It is important to note that you are not required to take the position of Successor Trustee. You are not compelled to take the post if you are nominated by a close friend or relative. When establishing the trust, the grantor most likely selected an alternate successor trustee, who would take over if you declined. While the specific obligations will differ, becoming a successor trustee is typically a significant time commitment.

Successor Trustee vs. Executor: What’s the Difference?

The roles of a Successor Trustee and an Executor are similar, and the two will frequently collaborate following the Grantor’s death. As previously stated, the Successor Trustee manages the Trust when the Grantor dies. Depending on the Trust, this responsibility could span several years when beneficiaries reach the age of majority.

An Executor, on the other hand, is in charge of handling someone’s affairs immediately following death. Their function is critical in completing ongoing issues, such as utility payments, rent, and so on, on time. The Executor must also pay any debts and taxes on time and distribute items according to the will. The Executor is responsible for reporting each of these responsibilities to probate court and closing the Estate. During this procedure, a Successor Trustee can assist them, but their responsibilities are limited to the Trust.

Trustee vs. Successor Trustee: What’s the Difference?

A Trustee and Successor Trustee have comparable duties but on a separate timetable. As soon as a Trust is established, a Trustee is appointed to oversee any property held by the Trust. They become the legal owners of their assets and are required to follow the Declaration of Trust. The Grantor is usually the Trustee in a Revocable Living Trust. When establishing an irrevocable trust, the Grantor must appoint someone else as a Trustee.

A Successor Trustee is almost always designated to ensure that the Trust is still handled after the Grantor or initial Trustee dies. The successor’s responsibilities will be the same as those of the Trustee, with the additional job of settling the Trust.

Who Should Be Appointed as a Successor Trustee?

Your Successor Trustee should be someone you can rely on to manage your finances, look after your beneficiaries, and act in accordance with your desires. During this time, they will not be monitored by the court. It can be difficult to imagine entrusting all of this responsibility to one individual, but it is critical to ensure that the Trust is maintained and closed properly. When choosing a Successor Trustee, consider the following options:

  • Adult children or other family members
  • Friendships within the family
  • A financial planner or a tax expert
  • An estate planning attorney
  • A Trustee firm

The most important thing to remember when choosing a Successor Trustee is to identify someone who is capable of handling the task. This individual will be responsible for negotiating complicated legal documents, managing your finances, and communicating with your beneficiaries. Choose someone who has the time and understanding to handle all of these tasks – and don’t be hesitant to get the help of a professional.

How To Become a Successor Trustee

When you are nominated to serve as a Successor Trustee, you will have the option of accepting or declining the position. If you accept, the Grantor will usually meet with you to go over the Declaration of Trust. You will now wait until it is appropriate for you to begin administering the Trust.

As a successor trustee, you must complete the necessary filings and receive permission to begin your role after the grantor’s death. This normally entails presenting the death certificate and a signed trust agreement to any institutions with which you are collaborating. You will then carry out the grantor’s instructions and maintain the trust until your tasks are fulfilled.

Becoming a Successor Trustee is a significant commitment, and it frequently prompts people to consider their own Estate Plan. Whether you already have a Trust or not, this can be an excellent time to organize your personal affairs. You can begin by drafting a Last Will and Testament and then move on to determining which sort of Trust you will require.

Other Types Of Trustees

#1. Administrative Trustee

As you might expect, an administrative trustee is in charge of handling the trust’s general administrative obligations.

This person is frequently in charge of day-to-day tasks such as bookkeeping, bill payment, asset distribution, and tax returns. Administrative trustees are often a trustors’ friend or family member who is capable of handling these obligations impartially.

Administrative trustees are a good option for those who have a simple trust that does not require any special abilities to manage. If you choose to appoint a friend or family member, be sure they are someone you completely trust.

#2. Independent trustee

An independent trustee is a person who is unrelated to the other parties involved in the trust’s terms, primarily the trustor and their beneficiaries.

Independent trustees perform the same function as administrative trustees, but they are more likely to preserve objectivity. The independent trustee should not be entitled to any property from the trust, which protects their impartiality and integrity.

If you are concerned that your family members will disagree, or worse, fight over the trust’s terms and management, it may be advisable to pick a trustee who can stay completely unbiased. You can rest easier knowing that they are less likely to be misled by emotion and have no hidden motives to manipulate the parameters of the trust in any way.

#3. Investment Trustee 

Consider appointing an investment trustee if you have an investment-centered trust. These trustees are experts in investments.

An investment trustee specializes in the management and growth of shares held in trust. They make daily judgments about purchasing and trading investments, as well as constructing a diverse portfolio. Unless the trust stipulates otherwise, their primary role is to develop wealth and maintain growth on behalf of the trust.

If investments are a substantial amount of your trust, or if growing your investments is a top priority (or both! ), hiring a professional may make sense. By appointing an investing trustee, your trust can benefit from the decisions made by someone who is most knowledgeable about how to manage and grow portfolios responsibly.

#4. Charitable Trustee

Charitable trustees are in charge of charity governance, which includes providing oversight on how the charity should be administered.

This type of trustee will manage a charitable trust on behalf of the donor. They will ensure that donations are made and, in many cases, will also serve on the charity’s board of trustees. Oversight of the charity, strategic planning, fundraising, and policy formulation are all responsibilities.

Charitable trustees are an excellent option for people who want to leave a considerable amount of their inheritance to one or more charitable organizations or NGOs. These professionals often have prior expertise managing and directing nonprofits, allowing them to best carry out your vision.

#5. Corporate Trustee

Corporate trustees are businesses that are contracted to manage trusts. These are primarily financial institutions such as banks or investment businesses.

A corporate trustee’s principal responsibility is to build, manage, and protect your wealth that has been placed in trust. Buying and selling assets, filing tax returns, paying bills, bookkeeping, and distributing assets are all examples of activities. These organizations are also well-versed in managing financial assets such as investments and real estate.

When a trustor does not have a friend or family member they can fully trust to manage their affairs, corporate trustees are frequently recruited. Furthermore, if they have intricate financial affairs, they may opt to hire an entity with professional knowledge.

#6. Bankruptcy Trustee

A bankruptcy trustee is appointed to represent the interests of a bankrupt estate. The United States Trustee, which is part of the Department of Justice, appoints this type of trustee.

A bankruptcy trustee’s responsibilities differ depending on the kind of procedure, which includes Chapter 7, Chapter 11, and Chapter 13. However, the primary responsibility is to represent the debtor’s trust and work with the bankruptcy court. For example, in a Chapter 7 bankruptcy, the trustee will try to liquidate all assets placed in the trust in order to pay creditors.

One would never like to appoint a bankruptcy trustee, but you would be forced to do so. If you declare bankruptcy, either willingly or involuntarily, the Department of Justice will appoint a trustee to represent your trust.

In Conclusion,

A successor trustee’s work can endure for years and typically necessitates some financial and legal knowledge to execute. When creating your own trust, consider who will be able to handle this amount of responsibility. Keep in mind that you can always hire a professional. If you have recently been appointed as a successor trustee, please consider the responsibility carefully, and don’t be hesitant to get advice from an attorney or other professional.

Successor Trustee FAQs

Who should be a trustee or executor?

Many people select a close family or a friend to be a trustor or executor. It’s a good idea to hire someone who is capable of carrying the responsibilities, and ideally, someone who is experienced with money and financial transactions.

What are the differences between trustee and executor?

One of the major differences between Trustee and Executor is the manner in which they are appointed. A Trustee is named under a Trust agreement, such as a Living Trust, to manage the estate of a deceased individual. A Last Will and Testament, often known as a Will, names an Executor/Personal Representative. The second key difference between an Executor and a Trustee is the mechanism through which an estate is settled. Wills and trusts operate in distinct ways. As a result, the process Executors and Trustees must go through to settle an estate is slightly different.

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