Choosing Successor Trustees


Pleasanton Living Trust attorney describes the factors to consider in naming successor Trustees of your Living Trust.

When you establish (or update) a Living Trust, one of the most important decisions you will make is who to name as the successor Trustee.


What Does Being the Trustee Mean, Exactly?


Let's begin by discussing the 3 parties involved when we're dealing with a Trust.


First, there is the person who is creating the Trust, who is referred to as either the Settlor, Trustor, or Grantor (they all mean the same thing).


Next, there is the Beneficiary, who is the person (or persons) for whom the Trust property is intended to be used. In other words, they are the individuals entitled to spend Trust money or use real estate owned by the Trust, for instance.


Then, there is the Trustee, who is the person (or persons) responsible for handling the Trust assets (just like any owner of property would do), for the benefit of the Trust Beneficiaries. They are responsible for using the money in the Trust to support the Beneficiaries of the Trust in accordance with the instructions in the Trust document, and are responsible for handling administrative matters (such as taxes) on behalf of the Trust, and generally overseeing the Trust assets.


When a person initially establishes a Living Trust, they are typically going to occupy all three roles discussed above. They are the Settlor, because they established the Trust and contributed their property to it. They are also the lifetime Beneficiaries who are entitled to the use and enjoyment of the Trust assets as long as they are alive. They are also the Trustees, because they will continue to act on behalf of the Trust in handling all of the Trust assets and dealing with the Trust in all respects.


What is a "Successor" Trustee, and When are they Needed?


A successor is defined as "one who follows or comes into the place of another."


We discussed above how, when a Trust is initially established, the person creating it (the Settlor) is typically the initial Trustee. Therefore, it is not until the Settlor of the Trust passes away or becomes mentally or physically unable to manage the Trust that a successor Trustee is needed. When either of those events occur, the Trust document states who is to become the successor Trustee.


Who You Should Consider Naming as Successor Trustee


The answer to this question is a very personal one. Most people choose individuals such as adult children, family members, or friends as their successor Trustees. Consider the factors discussed below and come up with a short list of individuals whom you deeply "Trust" when it comes to settling up your affairs and distributing or handling property and finances for your loved ones. A good successor Trustee is someone who:

  1. Is trustworthy, responsible and good at handling money;

  2. Is fair and can exercise independent judgment; and

  3. Has the time and willingness to step in and assist following your death or incapacity.

Those are the big factors. Note, that the successor Trustee does not need to be an investment guru or have any special skills. However, they should be capable of working with other professionals (such as financial advisors, tax advisors, real estate agents, and legal professionals) as needed. Also note that it is not necessary that the Trustee be local. Although that may be a plus, particularly if local real estate is involved, so many things can be handled online these days that geography is less of a factor.


Should My Trustee Be Younger than Me?


Not necessarily. If the best person for the job based on the above factors also happens to be younger than you (or even around your age), that is a bonus. However, it is perfectly acceptable to name someone that is older than you, so long as (1) they are capable of performing the job now and are likely to be capable for the reasonably foreseeable future, and (2) you also name one or more backups in case that person is not able to act as Trustee when the time ultimately comes (see below).


Name One or More Backups in the Trust Document


It is important to have layers built into the Trusteeship in case your primary successor Trustee is unable to act for any reason. For instance, it is possible that your primary Trustee will predecease you, be ill, or simply be unwilling to become the Trustee when their name is called. Therefore, come up with 1-3 backup Trustees if at all possible. Keep in mind, these decisions are always able to be changed later on by signing an amendment to your Trust document.


Can I Name 2 (or More) People to Act as Co-Trustees Together?


You certainly can. It is common for someone to name their 2 adult children as successor co-Trustees, for instance, or to name a married couple as co-Trustees. By doing so, the co-Trustees have equal rights and are able to act together, much like when multiple people (such as a husband and wife) are both on title to an asset. If you name co-Trustees, however, be mindful of a few points: First, be sure that the co-Trustees are equally capable and available, and that it is not a situation where one of them is very likely going be doing all of the work (if that is that case, just name the more qualified person as a sole Trustee and the other as a backup). Also, decide whether you are okay with them having authority to act individually in an "and/or" fashion (which is more convenient) or if you want all of the co-Trustees to have to sign for and approve every action taken on behalf of the Trust (less convenient, but more likely to ensure that all are in agreement). Lastly, make sure the co-Trustees work well together and are likely to have a relatively harmonious relationship. In other words, this is not the time to name two children who are frequently at odds with each other in the hopes that they will finally "learn to work together," because that's likely just a recipe for unnecessary conflict.


What About Professional Trustees?


As discussed in this article in Forbes, sometimes your loved ones will be better served with a professional Trustee or Trust company who has expertise with Trust administration. The upside of naming a professional is you can rest assured that they will have the time and experience needed to perform the tasks, and that they will be free from family conflict. The downside is that they will not know your beneficiaries personally the way that an individual often would, and the fees associated with using a professional are going to create an additional expense of the Trust. That said, sometimes it's well worth it, particularly if you have reservations about naming individuals as Trustees for any reason. Keep in mind however, that Trust companies have minimum asset requirements and will not always act as Trustee for certain types of assets, such as businesses for instance.


Your consultation with your estate planning attorney is an appropriate setting to discuss the pros and cons, as well as any concerns you may have, regarding your potential successor Trustees. Feel free to learn about our process for helping you establish or update your Living Trust, including options for your initial consultation to advise on matters related to Trusteeship and other important details.

20 views

Copyright © Qualls Law Firm

Contact Us

You will speak to or hear back from Brian personally.

Address

4695 Chabot Drive, Suite 200
Pleasanton, CA 94588

Contacts

  • Twitter
  • Facebook Social Icon

San Jose

1960 The Alameda, Suite 185
San Jose, CA

San Mateo

1900 S. Norfolk Street, Suite 350
San Mateo, CA

Lathrop

210 Towne Centre Drive
Lathrop, CA

Fresno

466 W Fallbrook Ave, Suite 102
Fresno, CA

Satellite Offices Available by Appointment: