Your Duty as Successor Trustee

trust attorney in Orange County

If you've been appointed as a successor trustee it means that the grantor trusts you with all the important aspects of their life should they become incapacitated or when they die. It's an important role with important responsibilities.

If you're about to appoint a successor trustee, it's a good idea to discuss their exact duties with a trust attorney in Orange County, so you can choose the person most capable of meeting the requirements.

What is a Successor Trustee and What are Their Duties?

A successor trustee is responsible for administering a trust should an event, illness, or death render you incapable of administering the trust yourself. Options include adult children, close friends, financial advisors, estate planning lawyers, and trust companies. A successor trustee's duties depend on the grantor's instructions, but there are certain duties that are inherent in the role.

The first item on the list is to notify the family and financial institutions of the grantor's incapacity or death. Next, they must provide the trust beneficiaries with copies of the Declaration of Trust. 

The successor trustee distributes the property and trust assets according to the terms of the trust. For example, they might have to manage the trust for a minor child until they come of age or meet the conditions of the trust, such as completing an undergraduate degree.

The most important thing to remember when appointing a successor trustee is the complexity of the role. They must understand estate planning and trust law and make informed decisions regarding financial management. This is just one reason why appointing an Orange County estate planning attorney is highly recommended.

Why You Need an Attorney: The Complexities of Trust Administration

A successor trustee assumes a fiduciary duty to the beneficiaries of a trust, which means they must always act with the beneficiaries' best interests at heart. Often, this includes investment management and navigation of state and federal tax laws. Add multiple beneficiaries, including charities, and the complexity of the trust agreement is compounded.

For this reason, it's essential that you talk to whoever you want to appoint before you make the decision final. Your best friend might be honored that you place that much trust in them, but their brain runs more to art and literature, not estate taxation and the finer details of living trust management.

Obtaining an EIN for the Estate: Navigating the IRS Website

An EIN is an Employer Identification Number or federal tax ID number. It's provided by the Internal Revenue Service (IRS) as it's used for tax reporting purposes. Generally, a revocable trust doesn't need an EIN because it falls within the grantor's income taxes.

An irrevocable trust needs an EIN because it's a separate entity with its own tax identification.

It starts to get confusing when irrevocable trusts are also grantor trusts which may or may not need an EIN because they may or may not be estate tax liabilities. 

This can be a step too far for family or friends who have been appointed successor trustees. A trust attorney is far more experienced at navigating the IRS website.

Opening a Trust Bank Account: Avoiding Common Pitfalls

A trust bank account is set up to conduct any trust-related financial transactions. There are different types of trust bank accounts and in some cases, more than one account may be necessary to meet all the trust's financial obligations.

For example, a trust checking account ensures funds are available to make payments immediately. There are also trust savings accounts and brokerage accounts.

It's important to know which account or accounts a specific trust needs so that time and money aren't wasted on accounts that serve no purpose or cost more money than they're worth.

A successor trustee may not know which account will most benefit the trust. Trust attorneys know precisely what accounts are needed and how to manage them.

What You Need to Know About Providing Information to Beneficiaries

Successor trustees have to report obligations to provide beneficiaries with pertinent information regarding the trust. For example, the information contained in the trust documents, including the terms,  list of assets, trust deeds, and identity of trustees. They must also provide beneficiaries with information that will answer their questions regarding the management of the trust.

Beneficiaries are also entitled to annual reports from trustees so they can see how well the trust is performing.

There is some information that successor trustees aren't bound to provide to beneficiaries. The line between confidential and shared information is fuzzy and best walked by experienced estate planning attorneys.

Establishing Trust Bank Accounts for Subtrusts: Ensuring Proper Distribution

Subtrusts are trusts within trusts and usually only come into being after the death of the grantor. Subtrusts include Bypass Trusts, Residual Trusts, and Tax Avoidance Trusts. They have various benefits, including asset protection from creditors and asset protection for children outside the current marriage.

There are situations where the assets need to be protected from the beneficiaries, including the financially irresponsible or those with expensive addictions.

Successor trustees are tasked with funding subtrusts and placing assets in particular subtrusts such as those for individual beneficiaries.

These decisions often require specialist estate planning knowledge, including the ramifications of the different types of subtrusts. A layman might not be qualified to make the correct choices. 

Trust Accounting: Keeping Accurate Records and Meeting Fiduciary Duties

Trust accounting is the recording and maintenance of financial records, including ledgers that contain financial transactions and monthly account reconciliation. There must be a paper trail that proves every transaction was right and proper and not against the best interests of the beneficiaries.

In cases where the successor trustee isn't qualified to carry out fiduciary responsibilities, they usually have the authority to delegate responsibilities to experts, such as professional investment managers.

Fulfill Your Duties as a Successor Trustee with the Help Parker Law Offices!

Parker Law Offices is a firm that specializes in all manner of estate planning, including trust administration and the assumption of all successor trustee duties and responsibilities. We also provide the specialist services of probate attorneys in Orange County.

Contact us for more information on the duties and responsibilities of successor trustees. Complete the contact form on our website or call us at 949-867-4818 at Parker Law Offices today!

Maria Parker assists her clients plan for their end of life health care wishes and the ultimate distribution of their wealth after death. She personally experienced the importance of planning at the time her father passed away.

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