Appointment of a successor trustee refers to the process of having a new trustee take over management of a trust. Most trusts are managed by their creators during their lifetime. But trusts don’t die with their makers, and that is why a successor trustee takes over. Successor trustees step in to administer a trust after the original trustee has passed away or becomes incapacitated. Naming a successor trustee helps ensure uninterrupted asset management and wealth distribution without the need for probate. Below, we discuss the role of the successor trustee and how successor trustees are appointed.
What is a successor trustee?
A successor trustee is a person or institution that administers a trust after a former trustee dies or becomes incapacitated. Successor trustees are most often spouses, adult children, or trusted estate planning professionals. Sometimes, there are multiple successor trustees who share responsibility for administering the trust, but most of the time, it is just one person or institution.
A successor trustee may be designated as a sole trustee, but may hire wealth managers, tax experts, attorneys, or real estate agents to help administer the trust.
How are successor trustees appointed?
Successor trustees are appointed in the trust document itself. The trustor will specify who they want to take over management of the trust if and when they can’t do it themselves. If no successor trustee is named, or the one designated cannot serve for some reason, a successor trustee may be appointed by beneficiaries or a court. It depends on state probate laws and/or what the trust says to do in such a case.
Successor trustees have to willingly accept their role — usually by signing a consent to serve or affidavit of appointment. If an existing trustee wishes to change their successor trustee, they must make an actual amendment to the trust. Most courts won’t accept informal, self-made changes. For these reasons, trust counsel should be consulted.
How should I choose a successor trustee?
Most people select a spouse, a child, or another family member as their successor trustee for a personal trust. But for larger trusts, many trustors select an institution or a private trustee, like a private professional fiduciary, as their successor. Sometimes trust makers designate a family member and an estate planning professional, accountant or financial professional to serve as co-trustees. Whatever the case, it’s vital to make sure that the person you choose as your successor trustee has the time, knowledge, and expertise to administer the trust. It’s also important to be honest and realistic about family dynamics to avoid a miscarriage of your true wishes. A good trust attorney can help you consider your options and plan accordingly.
When can a successor trustee take control of a trust?
Successor trustees can take over immediately upon the death of the original trustor or the preceding trustee. If the original trustor or preceding trustee is still alive, but unable to handle their own affairs — due to dementia or Alzheimer’s, for example — the successor trustee may likewise take over. Most trusts contain provisions specifying how and when incapacity can be proven. Oftentimes, a doctor or designated third party will need to certify that the trustor or trustee is no longer capable of managing their own finances. Family members who are beneficiaries and/or successor trustee(s) usually are the ones who initiate a competency evaluation if it becomes necessary. And obviously, the original trustee can always voluntarily relinquish their position, as long as it is done in a legitimate way.
Can beneficiaries stop the appointment of a successor trustee?
Only if the trust grants them the power to, or they can prove the successor trustee is unfit for their role. And of course courts have the power to remove a successor trustee for negligence or misconduct. But usually, the successor trustee is whoever the trust says it is, and only the current trustee has the power to change it. However, some modern trusts include an unbiased and objective “trust protector” who may have the authority to remove and replace a successor trustee. It just depends on how the trust is set up.
Who decides who the successor trustee is?
Initially, the creator of the trust. Where there is a shared spousal trust with co-trustees, and one spouse dies, the surviving spouse usually becomes sole trustee. The successor trustee usually only takes over after both spouses have passed or become incapacitated. A co-trustee who becomes a sole trustee may or may not have the power to change the successor trustee — it depends on the terms of the trust. In multi-generational trusts, successor trustees often have the power to appoint the next successor. In cases where no successor trustee is named, or the designated successor can’t fulfill their duties for some reason, the beneficiaries may have the power to appoint a replacement. If they do not have such a power or cannot agree, the courts may need to appoint a successor. But the trust will not be dissolved for lack of a trustee.
Does the successor trustee own the assets in a trust?
Once the successor trustee accepts an appointment, they transfer title to trust assets into their own name but as trustee. Importantly, this does not mean that they personally own those assets. A trust is its own legal entity, and the trustee is simply the person managing it. Successor trustees have to administer the trust according to its terms for the benefit of its heirs They usually don’t have the power to withhold distributions or disinherit beneficiaries unless the trust specifically grants them that authority.
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RMO LLP provides personal and efficient inheritance dispute services to individual and institutional clients. The firm’s attorneys focus on probate litigation involving contested trust, estate, probate, and conservatorship matters. Serving California and Texas, with offices in Los Angeles, Pasadena, Orange County, San Diego, Fresno, the Bay Area, Dallas, and Houston. For more information, please visit https://rmolawyers.com/.