A successor trustee is responsible for the management of a trust.
Although many individuals designate themselves as the trustee when they create a revocable living trust (RLT), they may not be able to serve forever.
While a RLT allows you to manage your own assets while alive, a RLT also provides directions for assets after your death.
Instructions include who will serve as the successor trustee to manage the RLT after your death.
According to a recent Los Altos Town Crier article titled “Be careful when choosing your successor trustee,” the importance of choosing someone responsible to oversee the RLT cannot be overstated.
The role of successor trustee can be demanding.
After your death as the trustmaker/initial trustee, the assets must be valued by the successor trustee.
The successor trustee must also make distributions from the trust to those listed as beneficiaries.
What if the guidelines provided in the trust are unclear?
The successor trustee must act as the fiduciary to prioritize the needs of the beneficiaries over the interests of the trustee.
Considering the importance of the role, who should you name as a successor trustee?
You may have several strong options.
If you have an adult child who wants the role, this could be good or cause issues.
Is your adult child organized, responsible, and reliable?
The person you choose will need to be capable of respecting laws, managing finances, and reporting taxes.
Trusts are sophisticated documents and tax reporting is often not straightforward.
While your adult child may be responsible and gifted at caregiving, he or she may struggle in managing finances.
If your money-savvy child lives far away, the physical distance could complicate the role of successor trustee.
Should you choose to designate an adult child, he or she may still require the assistance and support of a CPA, financial advisor, or estate planning attorney.
What should you do if none of your family members of friends is suitable for the role?
You can designate a professional to serve as the successor trustee.
Options for professional fiduciaries include trust companies and financial institutions.
While some banks have trust departments to serve as successor trustees, there may be high fees and minimum thresholds for the size of the estate.
Drawing on the sage advice of The Captain and Tennille, it pays to shop around.
Although there are many options available, not all options will be best suited to serve as your successor trustee.
An experienced estate planning attorney can help you navigate what might work best for your circumstances.
Reference: Los Altos Town Crier (Nov. 17, 2021) “Be careful when choosing your successor trustee”