So, you’ve been named the successor trustee of a loved one’s trust. This is an honor. The person who chose you probably really trusted you and thought that you are responsible enough to handle their trust assets. But, just because you’ve been named as successor trustee, doesn’t mean you have to accept. Before you accept and become the trustee, there are a few things you should consider.
The amount of time required
Administering a trust takes a lot of time and energy. Depending on the type of trust and how the trustor set it up, trust administration can take anywhere from six months to decades.
If the trust was set up to provide for a trustor during their lifetime and then disburse upon their death, trust administration might be relatively quick. A trustee could administer trust assets to beneficiaries outright in as little as 6 months. This is assuming that everything runs smoothly and as quickly as possible. If the trust is ongoing, like if there are assets held in trust for a surviving spouse or a child, you could end up being trustee for much, much longer.
Seriously consider how much time you have to give to the trust and how that might change in the next couple of years. Perhaps you have free time right now, but are planning on having a child next year. Or, maybe you’re in school, but think you will have less time once you graduate. Or, if your time is just already in tight supply, it may be best to politely decline to be trustee.
Your relationship with the beneficiaries
Being a trustee requires significant communication between the trustee and the trust’s beneficiaries. If you and the beneficiaries dislike each other or argue constantly, it may not be a good fit.
Even trustees and beneficiaries that start off with good relationships can end up tense if the beneficiary doesn’t like the way the trustee is handling the trust. If beneficiaries are unhappy, they can add to the stress of being a trustee. Beneficiaries can demand frequent accountings, ask the court to remove you as trustee, or even sue you if they feel that you have violated their legal duties to them.
Your relationship with any co-trustees
If the trust document names you and another person as co-trustees, you should take this into account when determining if you want to serve as trustee. Most co-trustees are required to act together unanimously. Some co-trustees can act with independently of one another. The trust document should specify if co-trustees have authority to act independently or not. Regardless, co-trustees need to have open and frequent communication, and the ability to come together to make decisions.
If the co-trustees are required to act together, it’s kind of like working on a group project in school. All decisions are supposed to be made together. All of the co-trustees have to put their name on the decisions. And, for one reason or another, one person usually ends up doing most of the work.
In an ideal world, the two co-trustees would split up the information gathering tasks. For example, one trustee may talk to the financial advisor, and the other talks to a real estate agent about selling the house. Then the trustees come together to make decisions together. If you and the other co-trustee are on bad terms or don’t tend to see eye-to-eye on things, it may be best to decline.
You could also be legally liable for actions the other co-trustee takes. If the co-trustee fails to file a tax return or send an accounting, you could also be in trouble.
All of this requires you and the co-trustee to spend time together. It also requires you to agree on decisions. If you and the co-trustee don’t get along, it will be a major obstacle.
Your organization skills
Your loved one picked you because they saw you as a responsible and organized person. But, you need to be honest with yourself- are you organized?
If the answer is yes- great! Skip to the next consideration.
But if you’re not sure, consider the following: Being a trustee requires you manage trust assets and keep on top of deadlines. It requires keeping track of every dollar going in and out of the trust. This includes information about where and how the funds were spent.
If your disorganized, there could be legal consequences. For example, if you leave mutual funds with awful performance for years without checking up on it, the beneficiaries could sue you for the losses they suffered and mismanagement of trust assets. If you miss an accounting deadline, the beneficiaries could sue you for failing to send accountings to them as required by the trust document.
This is not meant to scare you. Generally, mistakes are ok as long as you are acting reasonably and in good faith. But, if you’re not an organized person, it may be best to just politely decline.
Was the trustor organized?
One of your first jobs as a trustee will be to find and collect trust assets. This can be a piece of cake if the trustor left detailed and organized records. If not, this can be incredibly difficult. Even if the trustor was organized, you will still likely have to search through account statements, mail, and old tax returns to find important information. If they were not organized, it might be a struggle to even find these documents. If the trustor was disorganized, you should consider the additional time that will be required administering the trust.
Have you made your decision? If you have made it through this list and still feel like you are a good fit to be trustee, that’s great. You may want to do a little more research and talk to an attorney before you fully accept the role.
If you don’t think you should be the new trustee, you should formally decline, in writing and notify the beneficiaries of the trust. You should also notify the next successor trustee in line. Then, it will be up to them if they want to be a trustee or not. You can even send them this newsletter if you think it would be helpful. If no one is next in line to be successor trustee, or the next, named one doesn’t want the job, you should contact an attorney to help fill the role.
