It's an honor to be chosen as a successor trustee of a loved one's trust -- the person in charge of wrapping up the trust after the death of the person who created it. The person who chose you considered you trustworthy and responsible, someone who pays attention to detail and gets along with others. But do you want the job? Remember, you don't have to take it. To help you decide, here's a look at what you can expect if you serve as a trustee, and some situations when you may want to think twice about taking the job.
What Does a Trustee Do, Anyway?
First things first. It's hard to know whether the trustees' job is for you if you're not sure what the job is. So here's a quick summary of what a trust is, and why someone would create one in the first place.
A trust is an agreement in which one person (the "settlor") agrees to transfer property to another (the "trustee") who manages that property for the benefit of someone else (the "beneficiary"). The settlor must legally transfer ownership of the assets to the trustee of the trust. A deed transfers a house; other documents are used to transfer brokerage and bank accounts. The trust -- in the person of the trustee -- becomes the new legal owner, and the trustee becomes the new manager.
The most common kind of trust is a living trust, created to avoid probate court proceedings when the settlor dies. With most living trusts, the settlor is also the first trustee and beneficiary. So the settlor continues to use and manage the trust property; nothing changes, day to day. But when the settlor dies (or becomes unable to manage the trust assets), the next trustee steps up to manage and distribute the assets. That's you, if you accept the job.
When you are the trustee, your job is to manage trust assets and distribute them as the trust document directs. Your actual duties will vary enormously depending on what kind of trust you are in charge of, and what the trust document instructs you to do. But no matter what kind of trust you've got on your hands, you'll have certain challenges and issues.
You'll have to:
- identify and protect the trust assets
- figure out what the trust instrument (the document that created the trust) requires you to do
- be scrupulously honest
- communicate regularly with the trust beneficiaries
- manage the assets long-term (or distribute them to the beneficiaries right away), and
- end the trust when it's time (as determined by the trust instrument).
The chief benefit of this arrangement is that the assets can be distributed to the people who inherit them without the need for a probate court proceeding. That saves the inheritors time and money. If the trust is designed to last for a while, it can also provide a way to manage assets for young inheritors or provide tax savings. (For more information on what a trustee is expected to do, see Nolo's article The Trustee's Job: The First Six Months.)
Can Trustees Get Help?
As trustee, you are responsible for the trust's assets. But you can absolutely get expert help along the way -- and you should in many cases. You can use trust assets to pay for expert help. At the least, find yourself a good trust administration attorney who can guide you during the process, even if you want to do most of the work yourself. It also makes sense to hire a tax preparer or accountant to prepare the trust's tax return (usually due on April 15th of the year after the settlor died) and to advise you on the income tax issues raised by selling and distributing trust assets. For help finding a probate lawyer, see Nolo's article How to Find an Excellent Lawyer, Go straight to Nolo's Lawyer Directory for a list of wills, trusts & estate attorneys in your geographical area (click on the "Types of Cases" and "Work History" tabs to learn about a particular lawyer's experience, if any, with trusts and probate).
When Serving as Trustee May Be a Bad Idea
Most people agree to act as successor trustee because they feel a sense of loyalty to the person who asked them. In many cases, the trustee is either a beneficiary of the trust, a close friend or relative, or the deceased person's accountant or other adviser. But sometimes, if you're asked to serve as a trustee, the best thing you can do for all involved is to politely decline. No one will be happy if you take on the job but are unable to give it the time and attention it requires. For example, if you live far away from where the settlor lived, you might decline so that a sibling who lives closer can take over. There are other situations where it simply may not make sense for you to serve as a trustee. Think twice about taking the job if:
- You don't get along with the beneficiaries. If you don't like the people youre managing the trust for, you probably won't have an easy time doing it. (For some guidance on developing a good relationship with beneficiaries, see Nolo's article Advice for Trustees: Get Along With Beneficiaries.)
- You don't know what the trust maker (the settlor) owned and think it will be hard to find out. If you don't have the time for massive detective work, perhaps this just isn't the right job for you.
- Lawsuits are threatened or already in progress. As trustee, you'll have a duty to defend the trust against a lawsuit that could reduce its value; you will also need to collect money owed to the trust. Trust money can be used to pay for the legal expenses, but this may take up a lot of your time and energy.
- You're a cotrustee. This complicates everything, because generally all cotrustees must sign off on everything. Chances are that one of you will end up doing all the work.
If You Decide Not to Take the Job
If after the reviewing the trust situation and the beneficiaries, you decide that the trustee job is not for you, what should you do?
If the trust document names you as the successor trustee and you don't want to serve, you need to formally resign, in writing. Notify each of the trust beneficiaries that you have done so. It might seem odd to resign from something that you've never agreed to do, but that's the way it works. Notifying the beneficiaries in writing is the best way to protect yourself against any future charges that they had no idea that you weren't taking care of business.
You should also notify the person identified in the trust as the next successor trustee. With luck, the next trustee in line will accept.
If you've been appointed as a trustee, you can learn exactly how to proceed -- from handling paperwork to keeping beneficiaries informed and knowing when to call in the professionals -- with The Trustee's Legal Companion, by Liza Hanks and Carol Elias Zolla (Nolo).