When successively estate planning, a grantor naming a successor trustee to administer and execute the trust should the grantor expire or become mentally incapacitated is necessary.
However, who a grantor names as successor trustee is paramount in ensuring the grantor’s wishes are appropriately carried out, and the trust’s assets are appropriately managed and distributed. A corporate trustee is often the right appointment for many reasons.
A successor trustee executes and manages a trust per the trust’s terms when the primary trustee (often the grantor) is unable to continue to do so. For the remainder of this page, we will assume the grantor is also the primary trustee.
For beneficiaries that are minor children, you may want the successor trustee to manage the trust until they are old enough to receive distributions and/or act as trustees. Further, a successor trustee may manage distributions to the beneficiaries’ guardians while ensuring the trust appreciates and generates income as needed.
If the trust specifies that assets be passed to beneficiaries and the trust be terminated, the successor trustee is responsible for executing the trust.
The role of successor trustee carries great responsibility and often comes at a sensitive time for families.
Always inquire about the willingness of a trusted friend or family member when delegating the role and responsibilities of a successor trustee and provide them with information on what they may expect to fulfill their duties. Acting as successor trustee often mandates significant responsibility and requires time-consuming tasks.
Finally, a successor trustee should be compensated adequately for their services. If you're avoiding naming a corporate trustee due to expense concerns, a family member or friend performing ongoing trustee functions should not be doing so for free.
The trust document dictates a successor trustee's duties and responsibilities. The two most common scenarios are a grantor expiring or a newly mentally incapacitated grantor.
When a grantor dies, a successor trustee will execute or manage (sometimes both) the trust per the grantor’s trust terms. If, as noted previously, the trust is to be managed and utilized to care for children, the successor trustee will continue to manage the trust until the assets may be distributed to the trust’s beneficiaries.
Typical successor trustee duties when a grantor passes:
If a grantor becomes mentally incapacitated, the successor trustee is responsible for the grantor’s care. The successor trustee manages the grantor's affairs, minors, and dependents as designated in the trust, keeps proper records, contacts insurance providers, and seeks independent legal and investment counsel.
Unless otherwise stipulated in the trust, a successor trustee is not responsible for distributing trust assets until the grantor passes. When the time comes, the successor trustee then assumes the duties above.
A corporate trustee as your successor places your trust’s execution and management into qualified and specialized hands. Further, a corporate trustee removes significant responsibilities and duties from an individual that may not have the time nor knowledge to appropriately execute the grantor’s trust. The successor trustee may rely on professional assistance in executing a trust, but the successor trustee is accountable and must become familiar with managing the trust.
Trusts with appreciating assets, evolving trust terms, and minor beneficiaries demand a corporate trustee, as the more moving parts in a trust, the more effort and specialization your trust will require. Also, many trusts are complex and should be administered by experienced trust officers.