Considerations when selecting a successor trustee.

A successor trustee has authority as trustee when the settlor of the trust becomes incapacitated or dies. A trustee has fiduciary (legal) representative authority and powers to manage and control trust assets according to the terms of the trust for the benefit of the trust beneficiaries. When persons as settlors establish their living trust a relative or trusted friend is typically nominated as successor trustee. But is the person suitable to be trustee?

First, is the person trustworthy and reliable? A successor trustee is a fiduciary, i.e., legal representative, with important duties and responsibilities. Does the person have their own life in order? Do they have any personal issues that may tend to make them untrustworthy or unreliable? Unfortunately some settlors may have limited options. Consider a person who has no close family relations who selects a caretaker or romantic interest as successor trustee. That person may suffer from any chemical addictions or be unable to honestly manage assets. Embezzlement is now more likely. Neglected and isolated seniors are more prone embezzlement.

Second, does the successor trustee have the personal skills to avoid but if necessary manage inter personal conflict? A trustee has numerous duties where disagreements may arise, including the duty to protect trust assets, to make them income productive, and to treat trust beneficiaries impartially (unless the trust says otherwise). Thus, a trustee needs to have good communication skills and emotional stability to work through issues. They also need the fortitude to stand up against adverse parties. A trustee, for example, may have to evict occupants (even family members) from trust owned real properties if occupants are abusing the property, are not paying rent, or are preventing the trustee from selling the property. It may even involve the trustee being at odds with family members.

Third, can the successor trustee keep good records of trust finances and trustee actions? A successor trustee usually has to provide a report and an accounting to the beneficiaries. Records are also needed for income tax return preparation. Some people are well organized while others are totally disorganized.

Fourth, is the successor trustee able to properly to select, hire and supervise professionals? Trust administration usually involves hiring an attorney, an appraiser, a tax preparer, and a real estate agent, and perhaps others, as needed. These professionals expect to work with clients who are both responsible and reliable. Also the trustee needs to see that the professionals are actually performing their work and if not hire new professionals.

Fifth, does the successor trustee have a conflict of interest that either impairs or prevents them from properly administering the trust? Conflicts of interest here generally means someone actually is, or is presumed to be, on opposing sides of matters involved in the trust administration. For example, does the trustee having a self-serving motivation in administering the trust that conflicts with the settlor’s intentions or with the interests of other beneficiaries. Perhaps the successor trustee wants to purchase assets from the trust estate at less than full consideration to the detriment of other trust beneficiaries. Perhaps, the trustee owes money to the trust (e.g., a family loan) and is unable or unwilling to repay the trust but is nonetheless as trustee responsible to enforce and collect on their own debt.

Some problems may be resolved having co-trustees or trust directors with authority over the trustee’s administration. Co-trustees are responsible to administer the trust together and to prevent breaches of trust by another co-trustee; unless otherwise provided in the trust. Trust directors have authority to control the directed trustee over some aspect of the trust administration (e.g., investment, management and distributions). Otherwise private fiduciaries are available for hire if and when a professional trustee is needed or desired to manage the trust, provided the trust has the assets to pay for such services.