Should I Panic about being Named a Successor Trustee? - Part II

     Last week we began discussing the obligations of a Successor Trustee after the death of the Grantor. In addition to determining whom the beneficiaries of the Trust are and reviewing the Trust provisions, an important duty is assembling a list of the trust assets Sometimes that task is easy because the Grantor has kept good records. Other times the Successor Trustee must become a "detective" and find some of the assets. In addition to locating the assets, the Successor Trustee is responsible for determining the best way to invest the assets until making distributions pursuant to the terms of the Trust. The Trustee must follow the "Prudent Investor Rule", which requires that the Trustee must exercise reasonable care, skill, and caution in the investment and management of assets, taking into account the purposes, terms, and distribution requirement expressed in the Trust. Fortunately, the Trustee may retain qualified investment professionals to manage the assets if the Trustee does have the requisite investment skills necessary.

     The Successor Trustee may also be required to work in coordination with the Personal Representative of the Grantor’s Estate. In many instances, the Trust agreement instructs the Trustee to work with the Personal Representative of the Estate to pay for expenses, settle debts, and make tax elections. It is also common for an estate plan to name the same person as Personal Representative and successor Trustee. Whatever the case, it is important that the successor Trustee comply with the administrative provisions of the Trust and keep complete records of any expenses paid or distributions made from trust assets. 

     After securing the Trust assets and determining the instructions for administration and distribution of the assets, the Trustee should inform the Trust Beneficiaries of their interest in the Trust, how the assets are to be distributed, and how the assets are being spent. Once the initial duties of the successor Trustee are complete, the Trustee can begin making distributions from the Trust assets pursuant to the Trust provisions. While the Trustee may have some discretion, the Trustee must make distributions pursuant to the terms of the Trust. This means if the Trust places any limitations on the use of distributions or requirements that must be met prior to making a distribution, it is the Trustee's responsibility to ensure that the Beneficiary complies with these limitations or has met those requirements. 

     While in some cases, the administration of the Trust is very simple because the Trust requires immediate distributions to all beneficiaries, often the Trustee’s responsibility continues for many years while making distributions to Beneficiaries as they meet the Trust's requirements, assisting Beneficiaries who have spending and/or dependency issues, or simply maintaining assets until Beneficiaries reach mandated milestones, at which point the Trust assets may be distributed. 

     The role of the Successor Trustee is not one to accept lightly, as the position exposes the individual to a great amount of responsibility and work. Thankfully, Successor Trustees do not need to be personally responsible for all of the tasks of administering a Trust. The Successor Trustee can rely on other professionals, such as attorneys, accountants, and financial managers, to assist in the review, explanation and the administration of the Trusts. These professionals can be of great assistance to a Successor Trustee by providing guidance and assistance throughout the administration process. With this assistance, the Successor Trustee can serve in this important and rewarding position, and assist the Grantor's loved ones after the death of the Grantor.

Matt Ferrara