Congratulations. Today, you found out that someone very close chose you as their successor trustee. You are not surprised one bit.
You don’t like to brag, but you have had very important jobs in your life – assistant barbecue pitmaster at your cousin Frank’s Memorial Day party, three-time house sitter for your sister-in-law, and getaway driver for your children’s conflicting after-school activities. All were handled effortlessly. With a reputation that sterling, it would be silly of your loved one not to appoint you as successor trustee.
Of course, you do have one question: What does a successor trustee do?
Luckily, we can answer this question succinctly. Successor trustees wait. There are Revocable and Irrevocable Trusts. When a person creates a Revocable Trust, they usually select themselves as the initial trustee, with a back-up or successor trustee tasked to take over after the creator dies. Irrevocable Trusts will not have the creator as trustee, but another individual as primary trustee with a successor trustee waiting in the wings.
Not every successor trustee will ascend to the role of trustee in an Irrevocable Trust. Many Irrevocable Trust creators are older and choose an adult child as primary trustee who manages the trust for their parents’ remaining years and winds up the trust following their passing.
Revocable Trusts are a different story.
Creators of Revocable Trusts who are also trustees remain in total control over their assets during their lifetime. At best, the named successor trustee sits back and watches the trust creator/trustee buy property, sell stocks and handle every financial transaction for the trust. At worst, the successor trustee may be completely in the dark as to the workings of the Revocable Trust, as long as the creator is alive.
Everything changes when the creator/trustee dies. The successor trustee, if they are aware of their role and can locate a copy of the trust, then springs into action.
Successor trustees, upon assuming the role of trustee, must quickly educate themselves as to the trust’s holdings and the terms of the trust. Trusts have a “Schedule A” page that is supposed to list assets currently held by the trust. Trustees are responsible for keeping updated records. Sadly, too many “Schedule A” pages are blank or incomplete. This means a successor trustee must match the assets to the trust by poring over financial statements, mail addressed to the deceased creator, and searching deed records.
Once a successor trustee has a firm grasp on the trust’s assets, they will have to read the trust’s terms to understand how these assets should be managed and distributed. One goal of trusts is to avoid probate.
Trust assets are designed to pass to beneficiaries outside of court intervention. Trust terms may contain conditions that delay distributions, consider tax implications or create new trusts to protect assets for a minor or disabled beneficiary. Reading trusts may also clue a successor trustee as to assets that were not placed in the trust and will have to be administered through the probate process and a Pour-Over Will (the type of will that is made at the same time as the trust, which directs loose assets into the trust).
Tom Petty sang, “The waiting is the hardest part.” For successor trustees, the waiting is the easy part. Digging through a 30-year-old filing cabinet to find records for a trust is the hardest part.
Alan D. Feller, Esq., is managing partner of The Feller Group, located at 625 Route 6, Mahopac. He can be reached at email@example.com.