The Role and Responsibilities of a Successor Trustee

Appointing a successor trustee is probably the most important step in creating a trust. This is because, upon the unavailability of an original trustee due to various reasons, he is responsible to take over in the management of the trust assets. The large responsibility for managing and administrating the trust in conformity with its terms and the law rests on the shoulders of a successor trustee.

This article will go into what a successor trustee is, the definition, of corporate successor trustees, the difference between a trustee and a successor trustee, and what exactly is required from a living trust successor trustee.

What Is a Successor Trustee?

A successor trustee is one appointed to step in and take over when the original trustee cannot carry out the duties of that position. This most often occurs because of the incapacity, resignation, or death of the predecessor trustee. Otherwise, he has all the responsibility for managing the trust assets and distributing them among the beneficiaries while taking care of the implementation of the trust terms as intended by the maker.

Example:

In a living trust, the grantor is generally the original trustee. In the event of the incapacitation or death of the grantor, the successor trustee takes over to handle the trust.

Understanding the Role of a Successor Trustee

Successor Trustee Definition

It would be appropriate to break down the definition of a successor trustee as follows:

• Successor: One who follows after and replaces another in succession to an office, title, or position.
• Trustee: A person or an entity entrusted with a fiduciary responsibility towards the management and supervision of the trust assets on behalf of the beneficiaries.

Combining both terms, a successor trustee is actually the replacement of the backup trustee to begin serving if the principal cannot fulfill the duties required as a trustee. The legal and legal duty of the trustee binds them to follow all the instructions stated in the trust and perform for the beneficiary's best interest.

Successor Trustee Definition: Responsibilities and Key Duties Explained

Corporate Successor Trustee

A corporate successor trustee is a professional institution, like a bank or trust company, that acts as the successor trustee instead of an individual. Many people name a corporate successor trustee because they specialize in financial management, estate planning, and trust administration.

Advantages of a Corporate Successor Trustee:

1. Professionalism: Corporate trustees have experience and resources to manage complex trust matters.
2. Consistency: While individuals may be incapacitated to serve because of illness or personal reasons, a corporate trustee offers continuity and stability for the process.
3. Impartiality: Corporate trustees are neutral third parties; decisions are made objectively.
4. Compliance: Corporate trustees understand all legal and tax requirements and reduce the risk of mistakes or non-compliance.

When to Appoint a Corporate Successor Trustee:

• The trust assets are complex or substantial.
• If there is a possibility of conflicts among family members.
• When there is no suitable family member or other person a settlor trusts to act as successor trustee.

While corporate successor trustees have a lot of important advantages, they do typically charge for their services and may hence be less appealing for smaller trusts.

Understanding the Role and Benefits of a Corporate Successor Trustee

Difference Between Trustee and Successor Trustee

The terms trustee and successor trustee are somewhat interrelated yet very different:

• Trustee: The person or entity originally named to be in charge and manage the trust. In the case of a living trust, the grantor is often the trustee for their lifetime.
• Successor Trustee: This is the person or entity that replaces the trustee if and when the trustee can no longer carry out his duties. The successor trustee acts only upon the occurrence of one or more events, such as the incapacity or death of the original trustee.

In short, the trustee is the one representing the person who is the existing manager of the trust, while the successor trustee is his substitute in case conditions warrant the change in ownership.

Understanding the Difference Between Trustee and Successor Trustee

Duties of a Successor Trustee

There are a couple of important responsibilities that a successor trustee plays in the working of managing the trust effectively. Some of them include:

1. Identifying Trust Assets: Locate, identify, and secure all trust assets including real estate, bank accounts, investments, and personal property.
2. Management of Trust Assets: The management of the trust assets should be overseen to ensure their value is preserved and used for their intended purpose. This will include making investment decisions, paying bills, and handling property maintenance.
3. Paying Debts and Taxes: All debts, taxes, and expenses that are owed by the trust or the deceased grantor should be paid. This may include filing final income tax returns or estate tax returns.
4. Distribution of Assets to Beneficiaries: Under the trust instrument, distribute the assets to beneficiaries according to the terms. This process should be treated with fairness and in concurrence with the terms of the trust.
5. Record Keeping: Keep accurate records of the principal and income transactions in the form of receipts, disbursements, and statements of account.
6. Fiduciary Responsibility: A successor trustee has to act in the interest of the trust and the beneficiaries with the view to accomplishing the purpose of the trust.
7. Communicating with Beneficiaries: Inform the beneficiaries about the management or distribution affecting them regarding the trust assets.

Essential Duties for Successor Trustees in Estate Management

Living Trust Successor Trustee Responsibilities

In the context of a living trust, the successor trustee assumes a very important role once the grantor becomes incapacitated or dies. Their responsibilities include the following:

1. Taking Over Management: Immediately take over the management of the trust in the event of inability on the part of the grantor to act as trustee. This ensures there is no gap in the administration of the trust.
2. Incapacity Management: If the grantor becomes incapacitated, the successor trustee must use trust assets to cover medical expenses, care, and other needs.
3. Settling the Estate: After the grantor’s death, the successor trustee handles tasks such as:

• Notifying beneficiaries and creditors.
• Collecting death certificates.
• Paying final bills and taxes.
• Distributing assets to beneficiaries as specified in the trust.

1. Avoidance of Probate: Since a living trust avoids probate, the successor trustee has to ensure that the assets are distributed directly to the beneficiaries without court intervention.

In a living trust, the successor trustee should be diligent, and transparent, and work in concert with the terms of the trust. Otherwise, he could get into some legal liabilities or disputes among beneficiaries.

Conclusion

A successor trustee by One Pacific Trust has an important role in dealing with a trust for the appropriate management of the assets to be transferred according to the will and testament of the grantor. Whether the successor trustee is an individual or a corporate one, his or her role involves much responsibility, professionalism, and fiduciary duty.

The understanding of the distinction between the role of a trustee versus that of a successor trustee will go a long way in explaining the respective responsibilities each takes. A successor trustee dealing in living trusts assumes responsibility while one is incapacitated and even into death after that of the grantor.