Choosing a Successor Trustee

Choosing a Successor Trustee

When creating your Estate Plan, you need to make a few decisions.  One of these (many) important choices is: who should take care of my finances if I have become mentally incapacitated or if I have passed away?  This role is called the "successor trustee," "agent," or "attorney in fact."  For ease, we will refer to this simply as the successor trustee.

The person who you choose to manage your finances ideally should have a few qualities:

  • must be at least 18 years old and able to handle finances in the U.S.
  • trustworthy and mature
  • understands taxes, how to invest money wisely
  • can use discretion in the best interest of beneficiaries

There is no perfect formula for making this choice and it is not one to take lightly.  The successor trustee basically "runs the business" and has the fiduciary duty to follow what your trust says about how and when funds can be used.  You will want to choose someone who you trust can manage different accounts and make sure that funds are both invested and spent wisely with your beneficiaries' needs in mind.  It is important to note that during your lifetime, when you have capacity, you are able to change this nomination by amending your Estate Plan with an attorney.   I recommend reviewing your Estate Plan every three years to see if all of your choices are still valid and fit your wishes. 

If there is a particular person who you feel would be trustworthy in this role, but is not financially savvy, they can retain the assistance of professional advisors.  Using a professional advisor can ensure that the investments do the best for your beneficiaries.  These costs would be paid by the trust, rather than your successor trustee.  

If you do not feel you have anyone who you could trust to handle this role, you can use a financial institution as a corporate trustee.  The corporate trustee takes care of the investments and makes sure that the beneficiaries' expenses and financial needs are taken care of.  This may be a particularly good option when clients do not have any family or close friends in the U.S. and also in instances when the clients have a child with special needs and require an ongoing special needs trust.  (Note: if you are planning to use a corporate trustee, please make sure the Estate Planning attorney and the corporate trustee communicate in the course of creating your legal documents.  There may be special language requirements that the corporate trustee requires.)

You can nominate several successor trustees, either as co-trustees (either one of them can sign off on financial decisions) or in an order of priority.  This way, if something has happened to one of your nominees or they are no longer able to act as the trustee, you have other options available.  Still, you should make sure whoever you have nominated is someone you would feel confident in taking on the role.

Make sure to discuss this nomination with your desired successor trustee choices.  It is important that they be amenable to taking on this role should something happen to you.  When your Estate Plan has been finalized, it is also crucial that you let your nominees know where they can find your Estate Plan (whether it's the hard copy originals you've put in a safe place in your home or the digital scans have been provided to them).

We frequently discuss successor trustee choices with our clients when they are trying to decide who to choose.  Though we cannot make the ultimate decision for you, we can guide you to making a choice you are comfortable with.  In most cases, we don't expect anything to happen to you anytime soon, but it is still important that your planning be comprehensive, customized, and include choices that leave you feeling confident.