Compliments of Our Law Firm,
Written By: The American Academy of Estate Planning Attorneys
It is an honor to be named the successor Trustee of a loved one’s Trust. As thename implies, you’ve been given a position of trust and responsibility, and itmeans that your loved one thinks highly of your skill and ability, not to mentionyour integrity.
So, what does a successor Trustee do? Normally, the person who creates a Trust serves as the initial Trustee. Yourjob as the successor Trustee doesn’t begin until that person dies (or, in somecases, becomes disabled). At this point, you step into the Trustee’s shoes. As the successor Trustee, you are in charge of administering the Trust. Thismeans that you are obligated to follow the written terms of the Trust along withany applicable provisions of state or federal law in gathering, managing, anddistributing the Trust assets. The terms of each Trust are different, depending on the purposes for which itwas established, the property owned by the Trust, and the situations of thevarious Trust beneficiaries. This means there is no one-size-fits-all set ofinstructions for administering a Trust. Instead, you will need to closely followthe written terms of the Trust, employ your good judgment, and likely seek theadvice of one or more experts. Some of the questions you’ll encounter as you administer the Trust include:- What distributions need to be made? Do these distributions need to bemade to one or more beneficiaries, to one or more sub-Trusts, or to a combinationof these?
- What about taxes? Are estate taxes due? What about income taxes – dothey need to be paid on behalf of the Trust grantor or the Trust itself?
- Should you buy or sell assets on behalf of the Trust? How should youinvest Trust assets?
Serving as the successor Trustee means you have a fiduciary duty to thebeneficiaries. You must manage the Trust assets in the best interests of thebeneficiaries, rather than managing the assets as if they are your own. Managingthis way can complicate certain decisions that would normally be simple.
For instance, deciding how to invest Trust assets might seem simple.However,you’ll need to consider the written terms of the Trust, the requirements of statelaw, and a number of external factors in reaching the best choice. One of yourduties is to invest Trust assets in a prudent manner. But what exactly does thismean? As the successor Trustee, it might seem that the safest decision is tocontinue the investment choices of the initial Trustee. However, this course ofaction doesn’t factor in changes in the market. A down market can mean losses forthe Trust — losses for which you as the successor Trustee could be heldresponsible. Each Trust comes with a unique set of circumstances that can make the job ofa successor Trustee tricky. In most cases, it is wise to seek professionalguidance as you complete the Trust administration process. An experienced estateplanning attorney can review the terms of the Trust, brief you on therequirements of state and federal law, and alert you to pitfalls of which youmight be unaware. With expert help, you can minimize costly mistakes and fulfillyour role as the successor Trustee with confidence. Much of your job as the successor Trustee may be time sensitive. You’ll needto be aware of deadlines for taxes and other filings. The clock is ticking, butexpert help is just a phone call away.successor trustee, disabled, TA, trustadministration, distributions, taxes, grantor, investments
