If you are looking into creating a Revocable Living Trust, you probably want to name yourself as the initial Trustee (or you and your spouse would be named as Co-Trustees) so you can continue to have control of your assets and your financial affairs. However, you will also need to name Successor Trustees – other people to serve as Trustee if you are no longer able to act due to your incapacity or after your death. Many people ask us who they should name as their Successor Trustees.
Successor trustees can be your adult children, other relatives, a trusted friend, or a corporate trustee (bank trust department or trust company). If you choose an individual, you should name more than one in case your first choice is unable to act. They should be people you know and trust, people whose judgment you respect and who will also respect your wishes. You should keep in mind the qualifications of your candidates. Consider their personalities, their financial or business experience, and the time they have available due to their own family or career demands.
Your Successor Trustee will assume authority over your trust in two different scenarios. Who you choose as your Successor Trustee in these scenarios should be determined by the careful examination of a number of factors, including where the person lives (in relation to you), their experience managing assets, and of course their trustworthiness.
First, if you are incapacitated (meaning you are not capable of managing your property and financial affairs due to illness or injury), then your Successor Trustees will take over the management of your trust assets. If you become incapacitated, your Successor Trustee will be responsible for paying your bills, making financial decisions with the investment of your assets, and may even have to sell some of your assets. Your Successor Trustee will be able to do anything you could with your trust assets, as long as it does not conflict with the instructions in your trust document and does not breach their fiduciary duty.
Second, after you die, your Successor Trustee acts just like an executor of a probate estate would – taking an inventory of the trust assets, paying your final bills, selling assets when necessary, preparing your final tax returns, and distributing your assets according to the instructions in your trust.
When you name your Successor Trustees, you should remember that the trustees you name for incapacity do not have to be the same people as the people who serve after your death (although of course they can be the same), and you do not have to name them in the same order. For example, you might want to have your daughter be the first choice for Successor Trustee upon your incapacity with your son as the alternate, but you might want to have your son be the first choice for Successor Trustee upon your death, with your daughter being the alternate. You should choose people to serve in the role that suits them best, given all of the factors to consider.
You can name your Successor Trustees to act one at a time (first this one, and if that one can’t serve, then the next one), or you can name more than one to serve with each other as Successor Co-Trustees. If you are considering Co-Trustees, remember that they will have to work together to get things done, so choose people who get along and can work cooperatively.
When choosing the Successor Trustees for your living trust, keep in mind the provisions in your trust document for the distribution of the assets to your beneficiaries. For example, if you plan to keep assets in your trust after you die for your beneficiaries, your Successor Trustees would have more responsibilities for a longer period of time than if your assets will be distributed all at once. If you have assets being held in trust for a beneficiary, and are giving the Successor Trustee the discretion to make distributions to the beneficiary or not (deciding in the beneficiary’s best interest), then we generally caution against having one of your children be the trustee over that share. You need to consider the relationships between the Successor Trustee and the beneficiary, and how that might be impacted by the Successor Trustee refusing to make a requested distribution to the beneficiary. In those cases, having a corporate trustee (bank trust department or trust company) who can be impartial – and who doesn’t necessarily have to sit across from the beneficiary at Thanksgiving dinner – is a good idea.