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Successor Trustee – Probably Not Easy or Fun

Trying to understand and manage someone else’s financial life, follow obscure legal rules, and navigate family relationships while dealing with the loss of a loved one is the job of a successor trustee.


It Starts with a Revocable Trust


When an individual creates a revocable trust, it’s often meant as a substitute for a will. Because a trust can avoid the court probate process, the theory is that it will cost less and make it easier to manage the deceased person’s assets and transfer those assets to beneficiaries.  


When someone who created a revocable trust dies, his or her trust property has to be managed for a time and then transferred to whomever the trust says it should be distributed to. At this point, the trust acts like a will. It's now an irrevocable trust. The new trustee is responsible for following the instructions in the trust. This includes managing assets while they are in the trust and distributing assets to beneficiaries.


This isn’t going to happen on its own. Someone has to do this. Who? In the revocable trust, there is a provision that names a successor trustee, the person who takes over when the trust creator dies.


This choice is probably not given a tremendous amount of thought when the revocable trust is created. Certainly not by the person named in the trust to be the successor trustee. They probably are asked and say “yes” without any idea what yes means and don’t think about it again until they are pressed into service. It’s often more than they bargained for.

 a trust flowchart revocable trust creater dies successor trustee manages now irevocable trust for beneficiaries who get income property

Anyone Can End Up Being a Trustee


The successor trustee is likely to be a spouse, child, or other relative. Or there may be co-successor trustees. One could have a professional trustee, such as a bank trust department, but it’s not the norm.


Since the trustee is a relative, they are often also a beneficiary. This dual role can cause problems. But it’s hard to avoid. Most close relatives are going to be beneficiaries. And if they aren’t, why not? And in answering that same question, you probably aren’t going to want them to be managing the trust.


Who would want this? Since the job starts when someone dies, it’s not something anyone wants to think about. And when it happens, there’s a sense of obligation, and it doesn’t feel right to not to take on the responsibility.


It's A Lot of Responsibility. Most People Are Not Prepared For It.


Being the trustee is probably a thankless job. If you do everything right, no one will compliment you, but beneficiaries may be on the lookout for ways they are being shortchanged.


A trustee is supposed to act in the best interest of the trust. They don't always. And beneficiaries could have suspicions that the trustee is taking money for themselves. Beneficiaries may hire an attorney to inquire further and take the matter to court.

Beneficiaries have a legal right to know what a trustee is doing. After all, it’s money and property the beneficiaries have a right to. There are required notices and financial reports that must be provided to all beneficiaries.


This dynamic may be even more common where one sibling is the trustee/beneficiary and other siblings are the beneficiaries. Personal issues will be magnified because there's money involved. Plus, there's the stress of the death of a family member that started this process.


A trustee can get paid. But a trustee who’s a relative and is getting paid to be the trustee may cause resentment among beneficiaries. It might not be worth the aggravation.

trustee responsibilities follow trust instructions manage trust assets keep beneficiaries informed deal with complaining beneficiaries plus probablly not get paid could get sued

A Trustee Can Get Help


A trustee can hire an attorney to help with trust administration. The attorney can ensure proper records are kept and the correct reporting is sent to the beneficiaries.

An attorney can also advise the trustee on his or her responsibilities, the correct course of action, and how to avoid trustee liability.


If necessary, a trustee can ask the court to approve an action. If the trustee thinks beneficiaries are going to complain, getting court preapproval may be the way to go.

The attorney is paid out of the trust assets, not out of the trustee's own pocket.

trustees are not alone - a trustee can hire accountant, attorney, investment advisor, other professionals. a trustee can avoid problems by notifiying beneficiaries before action and get cour approval of action trust pays for all of this

Don’t Forget the Big Picture


The concept of a trust and its procedures can be confusing. One can get lost in the details. The main point to remember is that a revocable trust was created with specific goals in mind – the last wishes of the person who created it. The successor trustee is the person tasked with turning those wishes into reality. 

 

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