Who Should Be Your Successor Trustee?
If you have a revocable living trust or are thinking about establishing one, you’ve probably considered naming yourself as the initial Trustee so you can continue to manage your own financial affairs. But eventually someone will need to step in for you when you are no longer able to act due to incapacity or after your death. This is where selecting the right Successor Trustee plays an important role in the effective execution of your estate plan.
Responsibilities of A Successor Trustee
Chapter 736, Part VIII of the Florida State Statutes outlines the duties and responsibilities of your Trustees. They include: Duty of Loyalty, Duty of Impartiality, and Duty to Inform to name a few. Why should those matter? Well, stop and think about the individuals you’re considering naming. Can they remain impartial when two beneficiaries are claiming something’s unfair? Are they capable of keeping records and communicating information about the Trust’s assets to the beneficiaries? Understanding what will be expected of your Successor Trustee may help guide you in who to name.
During Incapacity: If you become incapacitated, your Successor Trustee will step in and take full control of your Trust for you – including making financial decisions involving Trust assets, selling or refinancing assets, and other tasks related to the assets owned by the Trust. Since your Trust can only directly control assets that it owns, it’s vitally important that you fully fund your trust. Your Successor Trustee may also be involved in paying bills and helping to ensure you get the care you need, so making sure they have proper access to funds is important!
After Death: After you die, your Successor Trustee acts just like a Personal Representative (aka Executor) of an estate would – they take an inventory of your assets, pay your final bills, sell assets if necessary, have your final tax returns prepared, and distribute your assets according to the instructions in your Trust. Just as with incapacity, the Successor Trustee is limited to managing assets that are owned by the Trust, so once again, fully funding your Trust is vitally important.
So, if the Successor Trustee is just like having a Personal Representative, then what’s the point of
having a Trust?!
Good question! Here’s the difference- a Personal Representative (named in your
Last Will & Testament) is appointed to open probate and go before a judge to have
your assets distributed as you’ve described in your Last Will & Testament. Those
wishes would become public record and the court would oversee everything. This
means increased costs and distribution based on the court’s schedule (not
uncommonly up to 18 months).
In comparison, your Successor Trustee will be acting without court supervision,
which is why your personal wishes can be handled privately and efficiently - and
probably one of the reasons you have a living trust in the first place. But this also
means it will be up to your successor to get things started and keep them moving
along.
What You Need to Keep in Mind:
Your Successor Trustee will be able to do anything you could with your Trust assets, as long as it does not conflict with the instructions in your Trust document and does not breach fiduciary duty.
While it isn't necessary for the Successor Trustee to know exactly what to do and when, (because your attorney, CPA, and other advisors can help guide him or her) it is important that you name someone who is responsible and conscientious.
Who Can Be a Successor Trustee?
Just as with your initial Trustee, your Successor Trustees can be almost any adult you choose. A spouse, adult children, other relatives, a trusted friend, or a professional/corporate trustee are all legitimate options. But “legitimate” and “best” are two different standards.
There’s a big design difference between a couple who have been married for years and only have children together versus a blended family with stepparents and “yours-mine-and-ours” children. This is not to say one scenario is better than another, just that the design considerations and needs are different.
For example, let’s say John and Jane have been married for 4 years. This is the second marriage
for both. Jane has a son from a previous relationship and a daughter with John. This scenario
requires focused attention on design as naming John as Successor Trustee could lead to
infighting and lawsuits if Jane’s son from the previous relationship feels money has been
mismanaged or that his half-sister is getting preferred treatment (being that she’s John’s child
and he’s not). These situations can be avoided by naming neutral third parties as Successor
Trustees or even as Successor Co-Trustees. Third parties don’t have a stake in the game so to speak and can provide better perspective than a family member.
Another scenario we see is when an adult child is struggling in some way, so the grandparents
decide to name the grandchildren as Successor Trustee. This means that when both
grandparents have passed away, the child of the struggling adult is in charge of making
distributions to their parent. Can we all agree there’s a level of awkward here that should be
avoided at all costs?
While you may say neither of these scenarios apply to you, naming your Successor Trustee is something that should not be taken lightly. And if you decide to pick family or friends, you should plan to name more than one in case your first Successor Trustee is unable to act.
What You Need to Keep in Mind When Deciding Who to Name:
Look to people you know and trust, people whose judgment you respect and who will also respect your wishes and be able to work with your beneficiaries. Neutral third parties and professional Trustees may be a good option. You can also name them as Co-Trustees to serve with your family or friends.
● When choosing a Successor Trustee, keep in mind the type and amount of assets in your Trust
and the potential complexity of the provisions in your Trust document.
For example, if you plan to keep assets in Trust after you die for your beneficiaries, your
Successor Trustee would have more responsibilities for a longer period of time than if
your assets were to be distributed all at once.
● Consider the qualifications of your candidates, including personalities, financial or business
experience, and time available due to their own family or career demands. Taking over as
Trustee for someone can take a substantial amount of time and requires a certain amount of
business and/or investment sense.
● Be sure to ask the people you are considering if they would want this responsibility. Don't put
them on the spot and just assume they want to do this. While many may feel honored to be
named, it’s still best to talk with them first. This is especially helpful so that you can discuss
your wishes and how you want your assets handled.
● Lastly, Trustees should be paid for their work, or at least be given the option to accept
payment; your Trust document should provide for fair and reasonable compensation whether
a family member/friend or a professional Trustee is serving.
The Key Takeaways:
● Because Successor Trustees have a lot of responsibility, they should be chosen carefully.
● Be honest about your specific family dynamics and needs. Those details should help shape who you
consider for this role.
● Successor Trustees can be your spouse, adult children, other relatives, a trusted friend, or a
corporate or professional trustee. You could also name a combination of these people (Co-Trustees)
to ensure your wishes are followed.
● Talk to people. Not all surprises are considered good ones.
Rest assured, we can help you select, educate, and advise your Successor Trustees. You are not alone in this process because we are here to help! Call us today at 941-448-1302 to set up your complimentary consultation.