Successor trustee: Overview, definition, and example
What is a successor trustee?
A successor trustee is a person or entity designated to assume the role and responsibilities of managing and administering a trust in the event that the original trustee is unable or unwilling to continue serving. This could occur due to the trustee’s death, incapacity, resignation, or removal. The successor trustee steps in to ensure the trust is properly managed, ensuring that the terms of the trust are followed and that the beneficiaries receive their entitled assets or benefits. The successor trustee must act in accordance with the terms of the trust agreement, and they are generally bound by the same duties and fiduciary responsibilities as the original trustee.
Why is a successor trustee important?
A successor trustee is important because they provide continuity in the management of a trust. When a trust is established, the settlor (the person creating the trust) designates a trustee to manage the trust’s assets and carry out the terms of the trust. If the original trustee is unable to fulfill their duties, the successor trustee ensures that the trust is properly administered without disruption. This designation is crucial for maintaining the trust’s operations and ensuring that the intentions of the settlor are upheld. It also helps protect the beneficiaries, ensuring they continue to receive the benefits of the trust as intended.
Understanding successor trustee through an example
Imagine a person creates a living trust to manage their assets and designates a family member as the trustee. The family member is responsible for managing the assets, paying taxes, and distributing property to the beneficiaries as outlined in the trust agreement. However, the trustee unexpectedly becomes incapacitated and cannot fulfill their role. As a result, the trust document names a successor trustee, such as a bank or another family member, who steps in to handle the trust administration. The successor trustee would take over the management of the assets, make necessary distributions, and fulfill the trust's requirements in accordance with the terms set by the settlor.
In another example, a business owner creates a trust to manage the business’s assets for the benefit of their children. The trust names a trusted friend as the initial trustee and a corporate trustee as the successor trustee. If the original trustee is unable to continue due to illness or resignation, the corporate trustee automatically takes over to ensure the business assets are managed and distributed properly.
An example of successor trustee clause
Here’s how a successor trustee clause might appear in a trust document:
“In the event that the Trustee is unable or unwilling to serve, [Name of Successor Trustee] shall act as the Successor Trustee. The Successor Trustee shall have all the rights, powers, and duties of the original Trustee, and shall continue to administer the Trust in accordance with its terms.”
Conclusion
A successor trustee ensures the smooth administration and continuity of a trust when the original trustee can no longer perform their duties. This role is essential for maintaining the integrity of the trust, protecting the interests of beneficiaries, and ensuring that the settlor’s wishes are carried out even after changes in the trustee’s capacity. By designating a successor trustee, the settlor provides assurance that the trust will be properly managed, regardless of future circumstances.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.