The Successor Trustee's Guide to Administering a Trust

Losing a loved one–or seeing them become unable to make decisions for themselves–is a heart-wrenching experience.

In addition to such a harrowing experience, if your loved one had a trust in place, in which you were named the successor trustee, you now have to deal with complex decisions and fiduciary duties.

But, what exactly is a Successor Trustee, and what are their duties?

Generally, the Successor Trustee’s duties will be defined by the Declaration of Trust, local law, and whether the Grantor of the trust has passed away or is incapacitated.

Additionally, the Successor Trustee is held to these fiduciary duties according to the trust, and thus must act for the interests of the named beneficiaries; not themselves.

The Successor Trustee must act prudently with the assets of the trust, not delegate their duties, enforce or defend claims brought against the trust, avoid conflicts of interest, and keep the property of the trust separate from their personal property.

If these duties are not followed, the trustee may be removed or suspended from their position, and this may also result in a surcharge.

Here are some of the key steps required when a Successor Trustee needs to administer the trust.

Once appointed to their role, the Successor Trustee should take the following steps to ensure proper administration of the trust:

1. Obtain a copy of the trust agreement (Declaration of Trust) and other legal documentation.
2. Provide copies of the above to the beneficiaries of the trust.
3. Take inventory of all the assets of the trust.
4. Notify any banks, brokerages, or other interested parties of their appointment as Successor Trustee.
5. Obtain a new tax identification description for the trust, if necessary (this is usually the case when a revocable trust becomes irrevocable).
6. Familiarize themselves with state law, or find advice from a trusted professional.
7. Collect funds that are owed to the trust and in turn, remit payment(s) to debtors of the trust.
8. Obtain accurate valuations of the trust assets.
9. Manage the assets of the trust as per the declaration of trust. This may include selling assets, investing funds, distributing assets, and other actions that are in the interests of the beneficiaries.
10. Close accounts in the name of the Grantor when they are no longer needed.
11. Keep an accurate record of all income and expenditures of the trust during the administration process.
12. Once all the obligations of your position have been met, according to the trust agreement, you will close the trust.

In cases where the Grantor is incapacitated, similar guidelines apply. The Successor Trustee still maintains the same obligations and fiduciary duties as before, but there may be a slightly different set of duties laid out in the declaration of trust. In addition to following the above steps, you should also:

• Apply for any disability benefits the Grantor may be entitled to.
• Ensure the Grantor receives the care he/she needs.
• Coordinate with other parties/agents of the Grantor as per any applicable Power of Attorney (financial or medical) to conduct the Grantor’s business.

The trust itself may or may not outline a compensation plan for the Successor Trustee. Regardless, the trustee has a legal right to be paid “reasonable” compensation for their efforts in managing and administering the trust.

If the declaration of trust does have a compensation plan in place, the trustee will typically be remitted payment as per those guidelines. However, because it is ultimately up to the trustees to decide exactly what “reasonable compensation” entails, disputes may arise as to whether the trustee is paying themselves fairly.

Regardless of the payment schedule indicated by the trust, or lack thereof, it is prudent to view your compensation as payment for your duties; not an excessive benefit to you personally.

The simple answer is this: a Successor Trustee administers and manages assets (property, funds, investments, etc.) for a trust, whereas an Executor manages the same for an estate pursuant to a will, not a trust.

To be more specific, Successor Trustees are nominated through a trust while Executors are appointed via the deceased’s last will and testament.

Although the two roles are different in their own ways, there are many common instances where the decedent has a will and a trust that name the same person to act as both the Executor and the Successor Trustee.

Can a Successor Trustee Also Be a Beneficiary?

In short, yes. It is entirely legal to name a beneficiary of the trust the Successor Trustee as well. This happens quite often with family trusts.

Can a Trustee Withdraw Money From an Irrevocable Trust?

Briefly, an irrevocable trust is one whose terms cannot be changed once they are officially validated. In contrast, revocable trusts do have the option of being adjusted, but only while the trustee(s) is alive.

A trustee can legally withdraw funds from the trust regardless of whether it is revocable or not. However, these funds must be taken out with the understanding that they are to be used for non-personal expenses, such as:

• Funeral expenses
• Repairs on trust property
• Administrative fees

Looking For Assistance? ClearEstate Can Help

As we’ve seen, trying to manage a trust as a Successor Trustee is no small feat. From understanding your fiduciary duties to following all the complex steps to administer the trust appropriately, it is easy to become overwhelmed. At ClearEstae, we pride ourselves on being trust management experts so you don’t have to be. Contact us and let’s get you the peace of mind you deserve.