Who Are the Trustees and What Do They Do?

Every living trust must have a trustee—that is, a person (or institution) who manages trust property under the terms of the trust. When you make Nolo’s Living Trust, you are the trustee of your trust. In the trust document, you name someone else to be the successor trustee to take over after you have died.

The Original Trustee

You will be the original trustee of your living trust. As trustee, you will have complete control over the property that will be held in the trust.

As a day-to-day, practical matter, it makes little difference that your property is now held in trust. You won't have any special duties as trustee of your trust. You do not even need to file a separate income tax return for the living trust. If the property generates income, just report it on your personal income tax return, as if the trust did not exist.

You have the same freedom to sell, give away or mortgage trust property as you did before you put the property into the living trust. The only difference is that you must now sign documents in your capacity as trustee.

EXAMPLE: Celeste wants to sell a piece of land that is owned in her name as trustee of her living trust. She prepares a deed transferring ownership of the land to the new owner and signs the deed as "Celeste Tornetti, trustee of the Celeste Tornetti Revocable Living Trust dated February 4, 20XX."

You can't name someone else as trustee. In the unlikely event you don't want to be the original trustee of your living trust, you cannot use this trust. See an estate planning lawyer to draw up a more specialized living trust. Naming someone else as trustee has important tax consequences and means you give up control over trust property.

The Trustee After One Grantor's Death or Incapacity

In a shared trust, if one grantor dies or becomes incapacitated and unable to manage his or her affairs, the other becomes sole trustee.

But who should decide that it's time for an original trustee to step aside, if the issue ever comes up?

In the trust document, you'll name someone (and two alternates) to make this determination. These people do not have to be doctors; ideally, you will choose people who know you well and can give an unbiased opinion about whether or not you need help taking care of financial matters.

If there's ever a question of your ability to manage the trust, the successor trustee will ask your first choice for an opinion of your capacity. If that person isn't available, the successor trustee will go to your second, and if necessary, third choice. If one of them states, in writing, that because of your condition, the successor trustee needs to take over as trustee, then the successor can do so.

If one trustee takes over management of trust property, he or she has no power over property not held in trust and no authority to make health care decisions for the incapacitated trustee. For this reason, it's also wise for each of you to create documents called durable powers of attorney, giving the other spouse or partner authority to manage property not owned in the name of the trust and to make health care decisions. (With Quicken WillMaker Plus, you can make a living will and durable power of attorney that express your wishes and are valid under the laws of your state.)

After one grantor's death, the survivor, as trustee, is responsible for distributing trust property of the deceased grantor that is not left to the surviving grantor. The survivor must follow the deceased grantor's wishes as they are set out in the trust document. The survivor has no legal power to modify the deceased grantor's intentions in any way.

The survivor may have long-term duties if the trust document creates a child's subtrust for trust property inherited by a young beneficiary. It falls to the surviving trustee to manage trust property left to a young beneficiary in this way, possibly for many years. This is explained in Property Management for Young Beneficiaries.

The Successor Trustee -- Individual Trust

When you make an individual trust, you must choose a successor trustee -- someone to act as trustee after your death or incapacity. The successor trustee has no power or responsibility while you are alive and capable of managing your affairs.

The Successor Trustee's Duties If You Are Incapacitated

you become physically or mentally incapacitated and unable to manage your affairs, the successor trustee takes over management of the property in your living trust. But who should decide that it's time for the successor trustee to take over, if the issue ever comes up?

In the trust document, you'll name someone (and two alternates) to make this determination. These people do not have to be doctors; ideally, you will choose people who know you well and can give an unbiased opinion about whether or not you need help taking care of financial matters.

If there's ever a question of your ability to manage the trust, the successor trustee will ask your first choice for an opinion of your capacity. If that person isn't available, the successor trustee will go to your second, and if necessary, third choice. If one of them states, in writing, that because of your condition, the successor trustee needs to take over as trustee, then the successor can do so.

If the successor trustee takes over management of the trust, he or she has authority to use trust property for your health care, support and welfare. The law requires the trustee to act honestly and prudently in managing the property. And because you are no longer the trustee, the new trustee must file an income tax return for the trust. At your death, any remaining trust property is distributed to your beneficiaries.

The successor trustee has no power over property not in your living trust and no authority to make medical decisions for you. For this reason, it's also wise to create documents called durable powers of attorney, giving the successor trustee authority to manage property not held in trust and to make health care decisions.

The Successor Trustee's Duties After Your Death

After your death, the successor trustee takes over as trustee. His or her primary responsibility is to distribute trust property to the beneficiaries named in your Declaration of Trust. That is usually a straightforward process. An outline of the steps the successor trustee needs to take to transfer certain common kinds of property is in After a Grantor Dies.

The successor trustee may have long-term duties if the trust document creates a child's subtrust for trust property inherited by a young beneficiary. You can read more about this in Property Management for Young Beneficiaries.

The Successor Trustee -- Shared Trust

When you make a shared trust, you must also choose a successor trustee -- someone to act as trustee after both of you have died or become incapacitated. The successor trustee has no power or responsibility if at least one original trustee is alive and capable of managing the trust.

The Successor Trustee's Duties After Both Grantors' Deaths

After both original trustees have died, the successor trustee named in the trust document takes over as trustee. The successor trustee's primary responsibility is to distribute trust property to the beneficiaries named in the trust document. That is usually a straightforward process that can be completed in a few weeks.

The successor trustee may, however, have long-term duties if the trust document creates a child's subtrust for trust property inherited by a young beneficiary. This is explained in Property Management for Young Beneficiaries.

The Successor Trustee's Duties If Either Grantor Is Incapacitated

The successor trustee will take over as trustee before both trustees have died if both trustees are unable to manage their affairs. Incapacity is determined by the person named in the trust document for this purpose. (See The Trustee After One Grantor's Death or Incapacity, above.) In this situation, the successor trustee has broad authority to manage the property in the living trust and use it for both grantors' health care, support and welfare. The law requires him or her to act honestly and prudently. And because the grantors are no longer the trustees, the new trustee must file an annual income tax return for the trust.