Executing and funding a trust is an important piece of most estate plans. The advantage of the trust is the same as the disadvantage: there is no one looking over the trustee’s shoulder. This means the trust can be administered without court supervision, but how it is done and how well it is done depends on the trustee.
Initially, the trustors (who create the trust) are usually the trustees. If a married couple, when one becomes incapacitated or dies the other spouse remains as trustee. But, when you, and your spouse, are no longer able to act as Trustee, either due to incapacity or death, it is important to have a successor Trustee who has the ability to deal with the duties of the trustee, and someone who will faithfully follow your instructions.. Having a responsible successor Trustee will protect the trust for the life of the trust and provide the most benefit to the beneficiaries.
It is not only important to select a successor Trustee, but that person should be someone responsible as well as someone you trust. Having an irresponsible Trustee can lead to assets being mismanaged, wasted, or beneficiaries having to wait unnecessarily for distributions. It extreme cases beneficiaries may have to remove the Trustee via court proceedings, which takes more time and money.
The successor Trustee could be anyone, such as a responsible child, sibling, or trusted friend. Or a trust company, a trust department of a bank, or a professional fiduciary. Sometimes trustors think they are “being fair” to all of their children by putting them all as co trustees. This can be a recipe for disaster, since the trustees have to all agree to administer the trust. Unless the children all get along well and will cooperate, choosing multiple successor co trustees may be a mistake. If the children don’t get along, consider appointing a neutral party.
Unless selecting a family member to be the successor Trustee, it is advisable to tell the person that they could be the Trustee of your trust at some point in the future. Otherwise you could have appointed a successor Trustee who refuses to act as Trustee which could mean the beneficiaries or the Court picks the successor Trustee.’
Having procedures in place in the trust for replacing a successor trustee avoids having to go to court to get a judge to appoint a trustee. If the designated successor trustees are not available or decline to serve, you can provide that they can select a successor, or the beneficiaries of trust can select the successor.
If the beneficiaries do not pick a successor Trustee, or the terms of the trust do not provide a procedure, then the Court appoints the successor Trustee. This process can take a few months and generally the Court will appoint a professional Trustee or an attorney that the judge trusts. This means that the trust will be paying fees from the trust to the successor Trustee.