Most living trusts that are created primarily to avoid probate and transfer assets to the next generation and will name the Trustor (the creator of the trust) as the initial trustee. If it is a joint marital living trust, usually both spouses are named as co-trustees. Then, when the first spouse passes away or is unable to manage his or her affairs, the surviving spouse becomes the sole Trustee.
Besides naming yourself as trustee, you should also designate a successor trustee. This will be the person (or institution) that will be responsible for carrying out the terms of the trust when you (or both spouses if it is a joint trust) pass away. Depending on the trust, the successor trustee may distribute the trust assets to the beneficiaries after you die or possibly continue to administer the trust for one or more generations. The successor trustee may also take over management of the trust if you become incapacitated.
So the question is: Who should you choose? The successor trustee could be the primary beneficiary of the trust, who has the incentive to handle the transfers promptly and efficiently. However, it can be anyone you trust, such as a close friend, an adult child, your spouse, your lawyer, an accountant, or a corporate trustee. You should also name an alternate successor trustee in case your first choice is unwilling or unable to serve.
Your successor trustee doesn’t need to live in the same state as you, but it is usually more convenient if he or she does. Consider the amount of time and effort the successor will have to spend and his or her ability to perform the duties of the trustee and deal with the beneficiaries.
How about naming co-successor trustees? Parents often choose to make their children equal beneficiaries of the trust, and sometimes wish to name them as co-successor trustees as well. However, this can sometimes prove to be problematic, especially if you fear the children may disagree. In many cases it makes sense to choose one child as trustee, rather than having to put in a mechanism (such as arbitration) for resolving conflicts between co-successors.
In some circumstances you may want the successor trustee to have some expertise, or at least the ability to hire a professional to help. For example, if any of your beneficiaries are minors or disabled, then the trust will continue to exist and the successor trustee will have to manage the trust property until the beneficiary reaches the age(s) that you have determined when the property would be distributed to them. This may involve preparing tax returns, investing funds, and so on. Similarly, potential conflicts or the size or complexity of the trust may present a need for an independent trustee, such as a lawyer, or trust company.
There are many factors to consider when selecting a successor trustee. In any event, a competent estate planning attorney can help guide you through the process of selecting the right successor trustee for your individual situation.
Written by Pebble Creek Estate Attorney Mark Jacobson