One of the most useful tools found in the average estate plan is a trust agreement. If you decide to incorporate a trust into your estate plan, you will need to appoint a Trustee. It is also wise to appoint a successor Trustee. To help you understand why appointing a successor Trustee is important, the Indianapolis attorneys at Frank & Kraft explain under what circumstances a successor Trustee might take over the administration of a trust.
What Is a Trust?
A trust is a legal agreement that lets the person creating the agreement (the “Settlor”) appoint a Trustee to manage and protect assets intended to benefit a third party. A trust can be a living trust or a testamentary trust. As the name implies, a living trust activates while the Settlor is alive whereas a testamentary trust is activated by a provision in the Settlor’s Last Will and Testament after the death of the Settlor. A trust can also be revocable or irrevocable.
What Does a Trustee Do?
The job of a Trustee is to manage the trust assets and administer the trust agreement using the provision in the trust agreement. The Settlor of the trust creates the trust provisions, and the details of a Trustee’s job will depend heavily on those provisions. In general, however, a Trustee is responsible for guarding and investing trust assets, communicating with trust beneficiaries, keeping trust records and paying taxes owed by the trust, and distributing assets to the trust beneficiaries according to the terms of the trust agreement.
When Might a Successor Trustee Take Over Administration of a Trust?
A successor Trustee is just that – a successor. If the appointed Trustee is unable or unwilling to serve as Trustee, and a successor Trustee was appointed in the trust agreement, the successor Trustee takes over the administration of the trust. Common reasons for a successor Trustee to take over include:
- Refusal to serve. The appointed Trustee is under no legal obligation to accept the appointment, meaning he/she can turn down the job, leaving the successor Trustee as the next in line for the job of Trustee.
- Death of Trustee. If the trust is a living trust, and the acting Trustee dies, the successor Trustee will assume the position of Trustee. Sometimes, when the trust is a testamentary trust, the original Trustee predeceases the activation of the trust, effectively moving the successor Trustee up to Trustee.
- Incapacity of Trustee. A common incapacity planning strategy is to create a revocable living trust and name yourself as the Trustee and a spouse/adult child/another trusted person as the successor Trustee. If you become incapacitated, control of your assets seamlessly passes to your chosen successor Trustee immediately and without the need for judicial approval or oversight.
What Happens If I Do Not Appoint a Successor Trustee?
When you create a trust you have the ability to name a successor Trustee and/or name the process for choosing a Trustee should one be needed in the future. If you create revocable living trust you can always modify the trust agreement to include a replacement or successor Trustee. If, however, you create an irrevocable living trust or a testamentary trust and you fail to name a successor and fail to include provisions for choosing a successor Trustee, a judge will be forced to appoint a successor Trustee if one is needed in the future.
Do You Have Questions about When a Successor Trustee Takes Over?
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about when a successor Trustee might take over the administration of a trust, contact the experienced Indianapolis trust administration attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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