Many people consider it an honor to be chosen as the successor trustee of a loved one's trust. Someone who appoints you as the trustee means that your loved one saw you as a responsible individual. In fact, they trust to handle their estate once they were gone. While being chosen as an estate's successor trustee is an honor, it can also be considered a burden. There is a great deal of work that comes with handling someone's final affairs. A trustee has a fiduciary responsibility to act in an honest and impartial manner on the grantor's behalf. Even if the trustee is a beneficiary of the trust, they must ensure that the estate is handled according to the grantor's wishes.
Agreeing to become a trustee is a major responsibility. Indeed, it is important that you understand exactly what you are getting yourself into. It is critical that you research what a trustee is, and what you will be responsible for. To help get you started in making this important decision, here is a look at answers to the most common questions people have about what it means to be a trustee.
What Is a Trust?
If you are unfamiliar with estate planning, you may find yourself asking: "what exactly is a trust". A trust is a legal arrangement in which a trust's creator (grantor) transfers their property into a trust where it is held for their benefit during their lifetime. Property transferred into a trust is technically owned by the trust, but the grantor continues to benefit from the trust's property, assets, and any income it generates during his/her lifetime as the trust's primary trustee.
Upon the grantor's death, the assets in the trust transfer to the trust's beneficiaries as outlined prior to their death. A successor trustee distributes the assets within the trust designated by the grantor. Trusts are a popular estate planning option, as they often allow for assets to be seamlessly transferred to beneficiaries without the hassle of probate court.
What Is a Trustee?
Now that you know what a trust is, you may wonder what a trustee is responsible for. A trustee is an individual, usually an account, lawyer, or trusted friend/family member who is responsible for managing a trust. Oftentimes, a trust's creator acts as the primary trustee during their lifetime, but they also designate successor trustees who will take over the trust and manage/distribute their assets should they die or become incapacitated. The grantor names whomever they want as a trustee within limitations. For example, they must be at least 18 years old and not likely to become bankrupt or incapacitated.
Many grantors name multiple successor trustees to ensure someone manages their assets.
Payment for Trustees
Becoming a trustee is a big responsibility that requires a lot of work. Thus, it is understandable if you are wondering whether a trustee is compensated for their efforts. Yes! A trustee is paid an amount included in the trust or as directed by the court based on what is considered a "reasonable amount." The amount a trustee is entitled to will vary depending on a variety of factors including the value of the estate. However, when the trustee is also a beneficiary of the trust, or they are a close relative to the grantor, trustees will often choose to forgo their pay and take the job merely to honor the deceased.
Do I Have to Take the Job?
While honored to learn that they have been named trustee, the prospect of this job feels overwhelming. If you do not feel up to the task, or you simply do not have time, you may wonder if you are required to take on the job. Fortunately, the answer to this is no.
If you are named the successor trustee in a loved one's trust and you don't want to serve, you can formally resign. While it may sound odd to have to resign from a position you never agreed to, this is often a required step. You will also want to notify each of the trust's beneficiaries that you are resigning in writing. Also, notify the person identified in the trust as the next successor trustee, and hopefully, they take the job.
Can a Trustee Get Help?
Alternatively, you may feel you need aid in the task. Can you get help from others? Or does a trustee have to do everything alone? Fortunately, you are not expected to go through this difficult process alone. In fact, often, trustees are encouraged to seek professional help to ensure that everything is handled correctly. You can even use the trust's assets to pay for expert help.
As a trustee, find a good trust administration attorney to guide you through this process. Additionally, trust finances are often complex, and you should consider hiring an accountant to prepare the trust's tax return and provide advice on income tax issues that could be raised by selling and distributing the trust's assets. Also, consult a probate attorney if part of the estate will have to go through probate court.
Conclusion
Acting as a successor trustee for a loved one's estate can leave you feeling confused. Feel free to contact us if you have additional questions or concerns about what it means to be a trustee, as well as if you need guidance during this difficult time.
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