If you are in the process of estate planning, naming a trustee and successor trustee is a critical piece of the puzzle. In their role, a trustee is legally responsible for the assets held within the trust. They assume fiduciary responsibility, which means the actions and decisions they make should be in the best interest of the trust. Acting as trustee is no easy feat, the duties and responsibilities of a trustee are often complex and time consuming, so it goes without saying naming the trustee of your trust is a decision that should be carefully considered.
Once you’ve appointed a trustee you’ll want to consider a back-up, or successor trustee. Selecting and appointing a successor trustee is equally important as selecting and appointing your trustee–here’s why.
What is a Successor Trustee?
Before we dive into the importance of naming a successor trustee, let’s cover what a successor trustee actually does. A successor trustee is essentially second in command when it comes to a trust. Should the trustee die or become incapacitated, the successor would take over the management and day-to-day responsibilities of the trust.
You can think about the relationship between trustee and successor trustee in the context of presidential succession. Should something happen to the president, the vice president would step in immediately to keep things in motion.
Just as the trustee assumes fiduciary responsibility and accountability of the trust, so does the successor trustee. They will carry on with the day-to-day duties, like bill paying, tax filing, and record keeping, while also now being responsible for investment decisions, trust property, and hiring trusted professionals to assist with the trust.
Selecting a Successor Trustee
When it comes to selecting a successor trustee, you may want to consider a family member, trusted friend, or a professional fiduciary. Anyone can do the job, but not everyone can do it well. You’ll want to carry out a similar vetting and selection process for a successor trustee. This role requires an individual with a high level of administrative and financial savvy, relying heavily on solid organization skills and dependability to carry out the trust requirements.
Once you’ve selected a person for the role, it’s time to solidify the plans. Depending on the state you live in or the requirements of the trust, the successor trustee must sign a document confirming and accepting their appointment. For this step it’s helpful to seek legal counsel to ensure all necessary paperwork is properly completed and filed.
Relationship with Trustee
Whether you yourself are acting as trustee or you’ve selected an outside party to take on the role, it’s imperative that the trustee and successor trustee maintain an ongoing relationship focused on the trust. Why? It sets up the successor to properly receive and carry out their duties without a hitch.
Though it’s certainly not a requirement to do so, looping the successor trustee in for trust-related meetings, filings, or relevant happenings can help better prepare the individual to understand their role.
Duties as Successor
If and when the successor is to be named main trustee, there are several steps needed to complete the process. Remember, the successor trustee –or now newly appointed trustee– is essentially in charge of the trust. Their duties can include:
- Accounting
- Taxes
- Administering assets
- Communicating with third-parties
- Investing
- Record keeping
- Managing assets
Though these responsibilities can look and feel overwhelming, they don’t have to default to the single individual trustee. A circle of trust professionals can provide guidance in their respective areas – from investment advice to legal counsel – and can offer a smooth transition for anyone taking over this new role.
Whether you’re deep in the throws of estate planning or are just now looking into the very first steps, know that naming a trusted and committed trustee and successor trustee are two important details that should not be overlooked.
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