When creating a Living Trust, we encourage our clients to give careful consideration to choosing a Successor Trustee. Depending on the complexity of the estate, Trust Administration can take months, and it can require a significant time commitment. It also requires dealing with financial accounts, so it’s important to identify someone who is comfortable working with numbers. If someone has been named as the Power of Attorney and Agent for the Advance Healthcare Directive, it may make sense to name the same person as Successor Trustee—there’s a good chance by the time of death, he/she will already have some familiarity with the estate, which will help streamline the Trust Administration.
Successor Trustee oversees the disbursement of the Trust
The Successor Trustee will be in charge of overseeing the disbursement of the Trust–essentially taking care of the assets for those who have been named as the Trust’s beneficiaries. The estate may include savings and other brokerage accounts, life insurance, the family home and other real property. If there are expensive collections—antiques, jewelry, cars and art that have been named in the Trust–they need to be included as part of the estate’s assets.
If no family member is a logical choice for the Successor Trustee, another individual, such as a fiduciary, can be appointed; an organization, such as a bank, can also be in charge of administering the Trust.
Assessing the value of the estate
One of the first duties of a Trust Administrator is assessing the total current value of the Trust’s assets. Along with this, it’s necessary to identify liabilities, including outstanding bills that need to be paid out of the total asset balance. This is important not just as a record-keeping exercise, but also to determine what taxes are due, as the Successor Trustee is responsible for paying all federal and state taxes.
Opening a new account in the name of the Trust
In order to pay creditors and for the costs of administering the estate, a separate account in the name of the Trust, with the Successor Trustee as signator, must be opened. A separate Employer Identification Number (EIN) or Tax Identification Number (TIN) for the Trust is necessary. With the EIN and death certificate, the Successor Trustee can open an account for the Trust’s administration and begin transferring accounts from the old accounts to the new Trust checking account; each receipt or disbursement must be fully explained.
Careful record-keeping is also part of the Successor Trustee’s responsibilities
The Successor Trustee must keep accurate records of all activity—property or other assets sold, money received and taxes paid. Beneficiaries may ask to see the Trust accounts at any time and the Successor Trustee should be able to explain the transactions that he/she has made. In most cases, the Successor Trustee should be prepared to give an account of the Trust funds on a six-month or annual basis.
Once all assets have been liquidated, all outstanding bills and taxes have been paid, the estate can be divided among the beneficiaries as detailed in the Trust.
A precaution: Naming a backup Successor Trustee
One more thing to think about. Most people name one of their children as Successor Trustee, but something they may not think about is how important it is to also name a backup, or alternate Successor Trustee. It’s not unusual for people these days to live healthy, productive lives into their 80s and 90s, which means they may outlive their grown children.
If a 72-year old son or daughter is the Successor Trustee, that son or daughter could die or become incapacitated before his/her parents. If there’s a backup, that person will become the Successor Trustee. If no backup has been identified, the court may consider other family members or third party, such as an attorney, fiduciary or organization that handles estates professionally, or even your bank. This, of course, means incurring additional costs.
If you have questions about naming a Successor Trustee for your Living Trust or would like to schedule an appointment to create or update your Trust, contact DP Legal Solutions today to: 510.346.5686.