Successor Trustee Overview
While the trustor/initial trustee is still living, the successor trustee acts similar to a financial power of attorney when the initial trustee(s) is unable to act. After the last trustor passes, the successor trustee acts similar to an executor of an estate.
Rather than picture a successor trustee as a financial guru, think of successor trustees as bookkeepers responsible for tracking all assets and sometimes acting as gatekeepers when young beneficiaries request early distributions for health, education, maintenance and support needs.
The successor trustee's job has a fiduciary responsibility for managing the assets in the best interests of the beneficiaries bound by the rules of the trust. In short, the tasks are to:
- Manage assets during the initial Trustee(s)'s incapacitation, similar to a Financial Power of Attorney.
- Collect and manage assets
- Pay creditors, taxes and expenses
- Distribute the balance of the trust assets to the named beneficiaries as instructed
Collection and management of the trust assets will require the successor trustee to obtain the appropriate documents such as death certificates to forward to banks, life insurance companies, investment companies and any other institutions that may hold trust assets.
For a detailed description of the successor trustees duties, read our successor trustee guide, which is included with all living trust estate plans.
When Successor Trustees Take Action
If the initial trustee(s) becomes incapacitated (determined by a physician) or resigns, the successor trustee then steps in. After the initial trustor(s)/trustee(s) passes, the successor trustee begins acting again.
When the successor trustee arrives at the bank with a note of incapacition from a physician, a notarized letter of resignation or a death certificate along with valid identification, the bank will match the information with their records of the successor trustees and allow the successor trustee to access the accounts.
Successor Trustee Compensation
Most people do not designate specific amounts. Many trusts include clauses allowing fair and reasonable compensation along with reimbursement of expenses incurred.
Banks and trust companies often have published scheduled fees, typically charging 1%-4% annually of the net estate while their services are used.
Individuals serving as successor tustees via trust language can not exceed the customary charges of corporate trustees in the same locality for similar services.
Individuals As Successor Trustees and Corporate Trustees
The decision on which to use depends on who you are considering in the role. It is also possible to use both.
Corporate trustees, such as Edward Jones Trust Company, are experienced in handling estate transfer and ongoing management. They are less likely to make procedural errors than family members listed as a successor trustee.
Individuals may do a better (or worse) job distributing assets to young beneficiaries for reasonable health, education, maintenance and support needs. They may have a better view of your liberal or conservative nature during requests from your beneficiaries than a corporate trustee. Close individuals may also be more aware of a young beneficiary's true nature.
Successor Trustee Heirarchy
Most people list three or four successor trustees when they write their trust but the successor trustees usually do not act all at once.
You will likely list one first successor trustee or two first successor co-trustees to manage the estate. Upon his/her/their incapacition, resignation or death, you will have second, third and potentially a fourth successor trustee listed.
A successor trustee acting alone does not need approval for every transaction of a co-successor trustee, so tasks be handled quickly. If the estate is large or management potentially burdensome, having a co-successor trustee might help - or hurt depending on the personalities of the people you select.
If only one or two individuals can reassure you of doing an adequate job, consider listing a corporate trustee as your "last-resort" successor trustee.
Before trustees and successor trustees can manage assets in a living trust, assets must first be transferred to the living trust.Recommended Pages to Read Next