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What Happens When The Initial Trustee Passes Away?

It's essential to prepare for every scenario to avoid delays in the carrying out of your final wishes. 

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Your trustee performs key functions on your behalf, such as protecting and managing the assets you leave behind for your loved ones. But what happens if they pass away, and who takes over the management of your trust? Though unlikely, it's essential to prepare for every scenario to avoid delays in the carrying out of your final wishes. 

What is a trustee?

A trustee is an individual you name to act as custodian of the assets within your trust. The trustee controls the trust assets and makes distributions to your beneficiaries. The trustee is required to manage the trust in accordance with the trust documents. When you create a trust, you will likely name yourself as trustee until you can no longer fulfill the role due to incapacitation or death. 

The trustee performs critical functions such as:

  • Manages trust assets
  • Makes distributions to trust beneficiaries
  • Keeps records pertaining to the trusts' income and expenses
  • Handles tax filings of the trust
  • Invests the trust assets prudently 
  • Pays trust expenses

The trustee assumes a fiduciary responsibility, which means they are required to act in the trust's best interest. This means protecting the assets within the trust, investing them prudently, and understanding the terms of the trust so they can carry out your wishes.

Trustees should communicate with the beneficiaries and be available to answer their questions as needed. If a trustee doesn't act in accordance with the trust, they can be held personally liable. One way trustees can help protect themselves is by keeping detailed records of all transactions. That way, if they ever find themselves in a courtroom, they have a paper trail and can prove that they always acted in the best interest of the trust.

How to choose a trustee

When appointing a trustee, choosing someone trustworthy, reliable, and objective is essential. A trustee can be anyone, whether related to you or not, such as friends, family, a lawyer, or a private trust company. A trustee is paid (but not always) for performing their duties, and their payment is typically taken directly from the trust assets. The trustee's compensation should be outlined within the trust documents to avoid any confusion. 

What happens when a trustee dies?

A trust can't operate without a trustee. If the initial trustee dies, someone must take over. When a trustee dies, the co-trustee or successor trustee will step in to fulfill the trustee's duties. If the grantor did not name a successor trustee, your beneficiaries need to appeal to the courts to appoint a new trustee. 

If the initial trustee had a co-trustee, the co-trustee becomes the primary trustee, and there is no need to get the court system involved. You might want to consider naming multiple successor trustees (ranked in order of preference) to avoid conflict among your heirs and a costly legal battle. 

Look over the terms of the trust to determine who the successor trustee is or what to do in the event of a vacancy in the office of the trustee.

If your beneficiaries have a preferred person they want to name, the court may consider it. If the court cannot identify an appropriate relative to act as the trustee, they might appoint a professional fiduciary to serve.

If a co-trustee dies, examine the trust instrument to determine the roles of any surviving trustees or any replacement trustees. Determine whether co-trustees must act together or whether co-trustees can act separately.

Duties of the successor trustee

The successor trustee must follow whatever is laid out in the trust documents. Essentially, they must pick up where the original trustee left off. That means managing the trust assets and handling distributions to beneficiaries. 

The successor trustee is responsible for paying off the grantor's debts and paying ongoing expenses related to managing the trust. Follow the wishes of the grantor. 

What to do if your trustee passes away

Here are three steps to take immediately if a trustee passes away. 

1. Examine the trust documents

Is there language in the trust documents that provide guidance in this situation? Maybe there are successor trustees named. If there is no specific information in the trust, the court system will need to get involved. If the grantor didn't specifically designate successor trustees, they might have at least provided instructions on how to go about choosing the next trustee. 

2. Notify third parties

It's crucial to notify banks, brokerage firms, and other third parties to determine what information they need to allow successor trustees to access trust accounts or assets.

If you are the successor trustee, consider communicating with the trust's beneficiaries to declare your intent or desire to perform the trustee's duties.

3. Appoint another trustee

Sometimes there is no alternate named in the trust who is available and willing to serve as the trustee. In this case, you need to determine if there is a trust provision regarding how to get a trustee appointed in the event of a vacancy in the trustee's office. 

A petition may have to be submitted to a court to have a judge appoint a trustee. If your trustee passes away before you, you can amend your trust.

The bottom line

It's important to plan for every scenario in your estate planning, including the possibility of your trustee passing away. You don't want to leave the future of your trust up to chance. It's essential to name a co-trustee and multiple successor trustees and provide directions on choosing a new trustee to avoid delays in the distribution of your assets and ensure a smooth transition for all parties involved. 

Create a trust online with MyAdvocate

Establishing a trust is one of the best ways to protect your loved ones. With MyAdvocate, you can create a legally valid trust within minutes and customize it to meet your needs. You can add multiple successor trustees to avoid delays in the distribution of your estate. 

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About the author

MyAdvocate Team

This post was written by MyAdvocate's team of estate planning attorneys.