Appointing a Successor trustee is the pre-requisite of all types of Living Trust. Whether revocable or Irrevocable, every trust requires a successor trustee who is responsible for the administration of the trust. Selection of a successor trustee is usually quite overwhelming as it requires a person whom you can trust blindly. Read the full article to understand the definition of a Successor Trustee and what does a Successor Trustee do.
What is a Successor Trustee?
The Successor trustee is a person appointed by the grantor to administer and manage the trust in case of;
- Death of the Grantor
- Incapacity of the Grantor
The grantor specifies the exact details of how the trust should be administered in a document called “ Declaration of Trust”. The successor trustee is bound to follow the terms specified in this document and it also contains the Powers and Responsibilities of the Successor Trustee.
In a Living Trust, the Grantor usually serves as the “initial trustee” while the successor trustee is responsible to serve after the Initial Trustee.
Depending upon the nature of the Trust created, some trusts may require the Successor trustee to serve for several years, for example, in case a beneficiary is a minor who will receive the distribution at a specific age while some trust requires the successor trustee to discharge the duties soon after the grantor dies or become incapacitated.
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What does a Successor Trustee do?
The duties of a successor trustee depend upon these 3:
- Terms of Declaration of Trust
- Local laws
- Whether the grantor has died or is incapacitated
Successor trustees are required to work in the best interest of the trust and its beneficiaries and not for their personal benefit unless the Declaration of Trust specifies it.
The general duties of a successor trustee are provided below.
Successor Trustee Duties When the Grantor Has Passed
Once the grantor has passed, the successor trustee is responsible to distribute the assets among the beneficiaries immediately unless there is a specific time prescribed in the terms of the trust for distribution. Meanwhile, the successor trustee is also responsible for administering the trust in a way that the assets are not wasted during the distribution. Now you need to understand in detail what does a Successor Trustee do.
The following are the duties of the Successor Trustee:
- Inform the family of the Grantor.
Inform the grantor’s family that you are the successor trustee of the trust created by the grantor.
- Distribute copies of the Declaration of Trust.
Provide the beneficiaries of the trust with the document of “ Declaration of Trust” to make them aware of the terms of the Trust.
- Obtain the death certificate of the Grantor.
The death certificate of the Grantor will help you to establish your legal authority to act as the Successor trustee
- Inform the Bank of the Grantor.
If the bank account of the Grantor is placed in the Trust, contact the relevant bank to access the accounts.
- Inform Social Security Administration and other organizations.
Social Security Administration, Life insurance companies, etc. should be informed in order to avail any death benefits if available.
- Coordinate with the Executor of the Grantor’s Will.
Check if the Grantor has any Will and contact the executor of the same to pay any outstanding bills or taxes using the trust assets and see if there is any Pour-over Will or not and include the assets held in the Pour-over Will to the Trust.
- Close the Grantor’s accounts.
Accounts like Credit cards, internet services, etc. need to be closed if they are no longer needed while accounts like insurance policies may be kept to preserve the value of the assets they apply to.
- Distribute the property among the beneficiaries.
Distribute the trust assets among the beneficiaries and start the distribution with any specific beneficiary if any. Specific beneficiaries should be given their share first before proceeding with the general instructions.
Successor Trustee Duties When the Grantor is Incapacitated
In case the Grantor has become incapacitated but is still living, the Successor Trustee is required to proceed as per the instructions written in the “Declaration of the Trust”. The Successor Trustee will pay for the care and treatment of the Grantor from the Trust assets and also for the loved ones of the Grantor.
The following are the duties of the Successor Trustee:
- Inform the family of the Grantor.
Inform the Grantor’s family that you are the successor trustee of the trust created by the grantor.
- Inform the Bank and other financial institutions of the Grantor.
If the bank account or any other financial account of the Grantor is placed in the Trust, contact the relevant bank to access the accounts.
- Apply for Disability benefits.
Check if the Grantor is eligible for any Disability benefits and apply for them.
- Coordinate with the agents of the Grantor.
Look for the Financial or Healthcare Powers of Attorney of the Grantor and connect with the respective agents to pay any outstanding bills and taxes of the Grantor. The successor trustee is required to ensure that the Grantor is getting the exact care he wanted during incapacitation.
- Maintain records and receipts of Bills.
If you have paid any bills for the Grantor, keep the receipts and records of everything you have done while discharging your duties as a Successor Trustee.
Do I have to serve as Successor Trustee after being nominated?
It is not necessary to serve as Successor Trustee even if you are nominated. When it's time to serve as the Successor Trustee it's your choice to accept the responsibility or not.
- In case you refuse to serve, the Alternate Successor Trustee will have the opportunity to serve as specified in the Declaration of Trust.
- In case no Alternate Successor Trustee is named, the Declaration of Trust will specify how he will be appointed.
Note- In case you have decided that you do not want to serve as the Living Trust Successor Trustee it is best to inform your Grantor know about it as soon as possible so that he can appoint someone else who is willing to serve.
What is a Living trust Successor Trustee fees?
The person appointed as the Successor Trustee needs to be paid for the services rendered by him for the administration of the Trust.
Successor Trustee’s fees may depend upon the following:
- The complexity of the Trust
- Number of beneficiaries
- The number of Successor Trustees appointed
- The number of assets held in the Trust
Fees of the Successor Trustee can be determined by the Grantor himself in the Trust by specifying a certain amount or they can mention the “reasonable amount” to be paid to Successor Trustee as per the services offered by them.
In case the Grantor has asked for payment of a “reasonable amount”, this amount will be decided by the laws of the respective States.
Another way to pay the Successor Trustee is by making a bequest in the name of the said Successor Trustee. Since Bequests are not taxable, Successor Trustee will be exempted from income tax.
Is the Successor Trustee the same as the Beneficiary?
There is no restriction on the Successor Trustee and the beneficiary being the same person but it is advised to appoint two different persons as Successor Trustee and beneficiary as it may lead to a conflict of interest between the two and there might be unequal treatment of beneficiaries.
