Planning for when you are no longer here can feel emotionally overwhelming. It is a magnificent gift to your family members and other beneficiaries that you are taking the time to consider your options and make an estate plan. Suppose you have chosen a revocable living trust as the best option to protect yourself and your loved ones.
The Benefits of a Revocable Living Trust
- You can act as trustee and control your accounts and property throughout your lifetime.
- You can be a beneficiary of your trust.
- You can keep your financial affairs private from the outside world.
- You can save your loved ones the financial costs and stress of going through the probate process.
Though you may have chosen to be the trustee of your revocable living trust, alone or with your spouse or partner as co-trustee, there will come a time in which you are unable or unwilling to fulfill that role. To ensure that your revocable living trust continues to function as you planned, you will need a successor to serve as trustee when you can no longer do so.
Review your revocable living trust estate plan regularly to ensure that the person or entity you have chosen as your successor trustee is still your best choice. Verify that you have a backup for your successor trustee, or even more than one, in case they are unable or unwilling to take on this role. Check your list of properties and accounts and match them to your beneficiaries to ensure that the amounts and schedule of your property distributions are as you intended. Your beneficiaries’ circumstances may have changed since you last reviewed your trust documents.
The Role of a Trustee
The trustee manages and administers the trust following the trust instructions and for the benefit of the beneficiaries. They will:
- Manage, invest, and distribute money and property to the appropriate beneficiaries.
- Follow their legal obligations and fiduciary duty to administer the trust for the beneficiaries’ benefit and do so impartially.
- Not use the trust account or property for their own benefit or in a way that is inconsistent with the trust instructions.
- Not enter into any transaction that will create a conflict of interest between the successor trustee and trust or the beneficiaries.
When Can Your Successor Trustee Take Over?
A successor trustee takes over when you plan for them to step into the role. Planning is essential so that, if the unexpected should occur, your trust will continue to function as you expected. Your successor trustee may take over:
- When you are incapacitated: If there comes a time when you are incapable of managing your trust, including making decisions and handling the day-to-day tasks of investing, managing, and distributing your accounts and property, your successor trustee can assume these duties for you. Having a successor trustee that you trust implicitly to understand your values and goals can relieve some stress associated with the lack of control you might feel. Since you likely named yourself as a beneficiary of your trust, your successor trustee can ensure you have the necessary care and financial support you need without court involvement.
- When you die: Your successor trustee will continue to manage your trust after you pass, ensuring that your trust instructions are followed. Your beneficiaries will receive the benefits you have chosen for them. If you documented your trust instructions carefully, the successor trustee will have great clarity about what they should do and how they should do it.
- Whenever you choose: If you no longer want to serve as the trustee of your trust, you may resign. Your successor trustee will step in and continue to follow the trust instructions. To make this process easier, you may consider serving as a co-trustee with your successor trustee, allowing time for them to learn more about your properties and accounts and how you want them managed and invested. This strategy also allows you to see how your successor trustee handles the trust. Knowing this could either give you the peace of mind that you left your trust in expert hands or give you cause to fire the successor trustee and choose a replacement if the trust allows it and you are still mentally able to make this decision.
Preparing your Estate Planning Documents
Your successor trustee may require information or authorization to act on your behalf in financial matters. It is essential to ensure that your other estate planning documents are kept current and that your successor trustee knows the scope of their responsibilities and these documents’ location.
- Financial Power of Attorney: Your financial power of attorney or agent will handle your individual accounts and properties. Your financial power of attorney and your successor trustee will typically be the same person, however, if for some reason they are not, ensure that these two people can collaborate and work well together.
- Healthcare Documents: Your successor trustee may need access to your medical power of attorney, advance directive or living will, and your Health Portability and Accountability Act (HIPAA) as the financing for your health care may come from the trust. Your successor trustee will need to be listed on your HIPAA authorization form to receive your medical information, including bills, and talk to healthcare providers if there are any discrepancies in the statements.
Regularly reviewing your estate plan ensures that they accurately reflect your current wishes. If you review your estate plan with your successor trustee, you can ensure they fully understand your goals and desires. You may choose to disclose a general overview of your estate plan and who will benefit from the trust accounts or property without discussing actual monetary values. You may also choose to allow your successor trustee to have full access to all of your trust documents and advisors. Your estate planning attorney can sit in on this discussion to facilitate the conversation and answer any questions.
You may feel more comfortable keeping the details of your trust confidential until after your death. At a minimum, consider notifying your successor trustee, whether a family member, close friend, or professional, that you have named them as your successor trustee, which will start the conversation and allow them to ask questions. Ensure they know why you have chosen them, where your documents are kept, and which advisors to contact for assistance in managing your trust. Providing the contact information for your estate planning attorney, certified public accountant, financial advisor, and insurance agent can ease the transition and decrease stress.
Establishing a revocable living trust is an excellent step toward a comprehensive estate plan. We are happy to assist you and your successor trustee in any way we can.