What are some important considerations when choosing a successor.
If you have a revocable living trust, you likely named yourself (and your spouse, if you have one) as trustee so you can continue to manage your own financial affairs. Eventually, however, someone will need to step in for you when you are no longer able to act due to incapacity or after your death. The Successor Trustee plays an important role in the effective execution of your estate plan.
The Key Takeaways:
● Because successor trustees have a lot of responsibility, they should be chosen carefully.
● Successor trustees can be your adult children, other relatives, a trusted friend, or a corporate or professional trustee.
Responsibilities of A Successor Trustee
At Incapacity: If you become incapacitated, your successor trustee will step in and take full control of your trust for you – making financial decisions involving trust assets, even selling or refinancing assets, and other tasks related to your trust’s assets. Since your trustee can only directly control assets that the trust owns, it’s vitally important that you fully fund your trust. Otherwise, the Trustee may need to use a Power of Attorney document to transfer those outside assets to your trust Your successor may also be involved in paying bills and helping to ensure you get the care you need.
After Death: After you die, your successor acts just like an executor of an estate 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. Like incapacity, the successor trustee is limited to managing assets that are owned by the trust, so fully funding your trust is vitally important. If you fail to fund your trust completely at this point, probate may be needed.
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 trustee to get things started and keep them moving along. Choosing a successor who is organized, detail oriented, and has a personality to get things done efficiently is important and is discussed more fully below.
What You Need to Know:
Your successor will be able to do anything you yourself could do with your trust assets, so long as it does not conflict with the instructions in your trust document and does not breach any fiduciary duty owed to the beneficiaries.
It isn’t necessary for the successor trustee 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.
Who Can Be Successor Trustees
Successor trustees can be your adult children, other relatives, a trusted friend and/or a professional or corporate trustee (bank trust department or trust company). If you choose an individual, you should name additional successor trustees in case your first choice is unable to act.
What You Need to Know:
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 would have more responsibilities for a longer period of time than if your assets will be distributed outright and all at once.
● Consider the qualifications of your candidates, including 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. Conversely, don’t feel like you absolutely have to have a green light to name someone as successor. They may resign or choose not to serve as trustee if they don’t want to serve.
● Trustees can and should be paid for their work; your trust document should provide for fair and reasonable compensation.
If you have questions about selecting, educating, or advising your successor trustees, please don’t hesitate to reach out for a consultation. Even if your estate plan has already been drafted, having a second opinion on your trustee lineup can save your family thousands of dollars by avoiding an improper selection. Give us a call today to schedule your free initial estate planning consultation.
Zach Wiegand is a Burnsville, Minnesota estate planning attorney who also handles probate in Dakota County and other counties in the greater Twin-Cities area. Zach is the owner of Gold Leaf Estate Planning, LLC, which is a Minnesota estate planning law firm that handles probate and trust administration in Minnesota. Zach was named a 2017 Minnesota Super Lawyer – Rising Star and he is a member of WealthCounsel – a national organization of estate planning attorneys dedicated to practice excellence. You can contact Zach via e-mail at email@example.com or by calling (952) 658-6503. Gold Leaf Estate Planning is located in Burnsville at 3000 County Road 42 W., Suite 310, Burnsville, MN 55337.