Establishing a trust can help ensure the realization of your estate wishes without having to worry about probate or a will contest. However, your success depends on having a trustee who is reliable and loyal to you. Sometimes a trustee dies before the purpose of the trust is complete.
The death of your trustee does not have to thwart your estate plans, but if you do not prepare for a possible trustee vacancy, you might have problems down the road. Here are a few situations that could result after a trustee dies.
A co-trustee takes over
With a co-trustee arrangement, the remaining trustee typically continues managing the trust if the other one has died. They handle responsibilities like maintaining property, paying taxes and distributing assets per the instructions of the trust creator. This ensures continued trust operation without court involvement.
A successor trustee steps in
In addition to co-trustees, you can designate a person to become your new trustee if your original trustee dies or steps down from the position. The process is generally simple, requiring you to list your successor candidate in your trust documents. After the first trustee is no longer available, your successor takes over, performing the duties required by your wishes.
A court names a new trustee
Failing to designate a successor trustee can cause complications. With no trustee, the probate court must appoint one. This not only delays distributions to beneficiaries, but the choice of the court may not understand your goals as your chosen successor would. This is why individuals who create trusts should name at least one backup trustee.
Trusts structured for multiple generations
It is possible to create a trust with long-term provisions to name trustees. For example, a dynasty trust can operate for decades across generations with instructions for ongoing management and distribution to beneficiaries. The Motley Fool explains that dynasty trusts can last for 1,000 years or even longer depending on the laws of the state.
The key to preventing the derailment of your trust operation is to properly outline roles and responsibilities in the trust documents to address gaps in administration. This ensures your legacy can endure through future trustees and beneficiaries.