A trust is a legal creation that gives one person a right to benefit from an asset while it is held by another person. The second person creates the trust by granting the right in the asset or property they own. This person is referred to as the “grantor.”
The grantor can also name someone else to manage the trust they create. This manager is known as a “trustee” and has a significant role in the administration of the trust. All trustees have a legal, fiduciary duty to the person or people with a right to benefit from the trust’s assets. These individuals are known as “beneficiaries,” and the trustee must manage and administer trust property on their behalf.
Who Appoints the Trustee of a Trust?
The grantor appoints the trustee. For revocable living trusts, a grantor often designates themselves as trustee for as long as they are alive and legally competent.
Revocable living trusts are one option for comprehensive estate planning that combines some aspects of a last will and testament with elements of a power of attorney. Because the grantor is setting aside some of their own property in the trust, they commonly want to manage the assets while they are alive.
However, when a grantor appoints themselves as trustee, they still must abide by all of a trustee’s duties and act in the beneficiaries’ best interests.
For a revocable living trust, the grantor can appoint someone to become the trustee upon their death. When the appointed trustee is unable or unwilling to carry out their duties, a court may appoint a trustee to manage the trust property and its distribution.
For example, imagine creating a revocable living trust and nominating your daughter as your successor trustee. If your daughter passes away before you do or becomes incapacitated after your death, a probate judge will decide who is best positioned to manage your trust. In these terrible circumstances, the judge will likely nominate a professional trustee, who will be paid (a legally capped amount) from trust assets.
Does a Trustee Have to Be Appointed?
Yes, all trustees are appointed, either by a grantor or a probate court. Further, every trustee must willingly accept their appointment.
It is crucial that future trustees understand the extent of their duties and the time commitment becoming a trustee may entail. You should always consult with someone before naming them as a trustee. There are professionals who charge a set fee whom you can also appoint, and these individuals have extensive experience managing various trusts and distributing assets.
If you prefer having someone you know and trust as your trustee, you can sit down and discuss your wishes with them when you create a trust. However, make sure everything you communicate to the potential trustee is consistent with the terms of the trust instrument. The trustee must carry out your wishes as expressed in the document.
This would also be an excellent time to discuss compensation. For family or revocable living trusts, the trustee may also be a beneficiary of the trust. Other beneficiaries can resent the control or management of your chosen trustee. This is especially true if the trustee is being paid. Since that payment comes from the trust, it necessarily reduces the distributions to other beneficiaries.
What Happens When a Trustee Is Appointed?
The trustee should take concrete steps to prepare themselves to effectively manage the trust’s property. The first step is identifying and securing all the trust’s assets.
If you appoint a successor trustee when you are alive, have a meeting to go over the trust’s property and where all the legal deeds can be accessed. If you become a trustee after someone passes away, begin by taking an inventory of trust property.
You will not only want to locate all deeds and valuables (such as safe deposit boxes) but ensure you, as the trustee, can access this property. For bank, retirement, and investment accounts, you may need to prevent the grantor’s death certificate along with notarized copies of the trust document. Once you are verified, make sure you set up easy online access to all trust accounts.
Legally, as a trustee, you are in control of trust assets. Therefore, you should quickly consult with professionals regarding strategies for managing and growing trust property. You will also need to ensure the trust pays its taxes.
Finally, you can begin distributing the trust to all of its beneficiaries. It’s always a good idea to consult with a probate litigation attorney when you are first appointed to ensure you comply with the terms of the trust. However, it’s never too late to get an expert opinion.
Have questions? We’re happy to discuss.
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The Trustee’s Guide to Trust Distributions
The Trustee’s Guide to Avoiding Trustee Removal
The Guide to Breach of Fiduciary Duty and Abuse
About RMO, LLP
RMO LLP serves clients in Los Angeles, Santa Monica, Ventura, Santa Barbara, San Francisco, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri, and Kansas. Our founder, Scott E. Rahn, has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation – Trusts and Estates. For a free consultation, call (424) 320-9444 or visit: https://rmolawyers.com.