Setting up a trust can be great way to control how your assets are distributed to your heirs after you pass away. Trusts are in many ways more flexible than wills in managing an estate’s assets. When you’ve passed, the successor trustee – effectively the “executor” of your trust – is responsible for managing your trust and its assets. A trustee is similar to the executor of a will. Instead of shepherding your estate through the probate process, however, a trustee manages your trust until the assets can go to your beneficiaries. If you have specific estate planning questions, consider speaking with a financial advisor.
What Is a Successor Trustee?
You’ll appoint a successor trustee when you create a revocable living trust. When you set up your trust, you will serve as both the settlor (creator) and the trustee while you’re alive. As the settlor/trustee, you’ll be able to move assets in and out of the trust, change the terms and beneficiaries and even revoke the trust if you wish. That’s why it’s called a revocable living trust.
Once you die, your successor trustee will assume control of the trust and the duties of trustee. Most often, these duties include investing the assets of the trust prudently until the time comes to transfer the assets to the beneficiaries. When that time comes, the successor trustee will handle the transfer and ensure that the terms of the trust are followed.
One of the most salient benefits of opting for a living trust over a testamentary trust is that the former allows you to avoid dealing with the probate court. Your successor trustee will be able to manage your trust without having to obtain permission from the court. The successor trustee won’t have to report every action and decision to the court, either.
What Are the Duties of a Successor Trustee?
Your successor trustee will need to manage the assets in your trust as he or she sees best fit. The successor trustee will do so until the time comes to transfer the assets to your beneficiaries.
This responsibility only kicks in, however, once you can no longer effectively serve as your own trustee. Once you die, your trustee must appraise the value of all the assets in the trust, determine and pay any tax liabilities and set aside a fund for any expenses that the administration of the trust may incur. If you named your trust as the beneficiary of any life insurance policies, your trustee will also need to collect those policies.
Let’s say your trust needs to exist for a long time after you die. In this case, your successor trustee will choose how to invest the assets in your trust. They’ll also be responsible for keeping tabs on these investments. Once the time comes to close the trust, your trustee will be in charge of distributing assets to the proper beneficiaries according to the terms of the trust.
How Is a Successor Trustee Different From an Executor?
The biggest difference between an executor and a trustee is the duration of the role. An executor is in charge of handling the probate process immediately after you die. The executor will locate and collect your assets, as well as pay your debts and taxes. She’ll also report to the probate court and distribute your assets after your death. You have no say regarding when this process takes place.
With a trustee, there is a much larger variance in how long the job lasts. Let’s say you leave a grandson an inheritance, but don’t want him to receive it until he graduates from college. You can specify as much in your trust. If you pass while he’s still in high school, your successor trustee will be in charge of protecting that inheritance until he graduates from college.
Are There Successor Trustees for Irrevocable Trusts?
Irrevocable trusts can have successor trustees, but the term has a slightly different usage. When you create an irrevocable trust, you don’t have the ability to serve as your own trustee while you’re alive. You must choose someone else to serve as your trustee.
If your original trustee either dies or becomes incapacitates, you can name a successor trustee to replace the original. The successor trustee has the exact same duties and powers as the original trustee.
Serving as a trustee is a big job that can take time and energy. In some situations, it can even last for years. If you are creating a living trust and choosing who to appoint as successor trustee, make sure you choose someone who is competent, trustworthy and healthy. Let’s say it’s possible that your trust could exists for several years after your death before it settles. In this case, it would be smart to choose a younger successor trustee to avoid any issues.
Tips for Planning Your Estate
- A financial advisor can be a big help as you organize your assets and ensure that your children and grandchildren are taken care of. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serves your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Once you choose your beneficiaries, don’t forget to update your retirement accounts, pensions, life insurance and brokerage accounts. Aside from choosing your beneficiaries, you’ll also need to designate power of attorney. If you have minor children, you’ll need to determine a guardianship plan.
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