Legal Definitions - Successor Trustee

A Successor Trustee is an individual or an institution designated to take over the management and administration of a trust when the original trustee is no longer able to fulfill their duties. This typically occurs if the original trustee dies, becomes incapacitated, or resigns, as specified by the terms of the trust document. The Successor Trustee's responsibilities and powers are strictly defined by the instructions laid out in the trust agreement created by the person who established the trust (often called the Grantor or Settlor).

Here are a few examples to illustrate the role of a Successor Trustee:

• Example 1: Incapacity Due to Illness

  Eleanor, a retired teacher, creates a living trust to manage her assets and names herself as the initial trustee. She designates her daughter, Sarah, as the Successor Trustee. Years later, Eleanor develops advanced Alzheimer's disease and is no longer capable of making financial decisions or managing her trust. According to the trust document, Sarah steps in as the Successor Trustee. Sarah then assumes responsibility for managing Eleanor's investments, paying her bills, and ensuring her care, all in accordance with the instructions Eleanor outlined in the trust before her illness.

  This illustrates how a Successor Trustee takes over when the original trustee becomes incapacitated, ensuring the trust's assets continue to be managed for the beneficiary's benefit.

• Example 2: Death of the Original Trustee

  Mark and Lisa establish a joint living trust to hold their shared property. Mark is named as the primary trustee, and Lisa is named as the Successor Trustee. Tragically, Mark passes away unexpectedly. Upon his death, Lisa automatically becomes the Successor Trustee. She then assumes full control over the trust's assets, managing them according to the trust's provisions, which might include distributing assets to beneficiaries or continuing to manage them for her own benefit as the surviving spouse.

  This example demonstrates the Successor Trustee stepping in due to the death of the original trustee, ensuring a seamless transition of asset management without the need for probate court involvement for trust assets.

• Example 3: Resignation of the Original Trustee

  David creates a trust for his minor children and appoints his close friend, Michael, as the initial trustee, knowing Michael is financially savvy. The trust document also names a professional trust company as the Successor Trustee, should Michael be unable or unwilling to serve. Five years later, Michael decides to move to another country permanently and realizes he can no longer effectively manage the trust from abroad. He formally resigns from his role as trustee. As per the trust's terms, the designated trust company then assumes the role of Successor Trustee, taking over the management of the children's assets until they reach the age specified in the trust.

  This scenario shows that a Successor Trustee can also be an institution and can step in if the original trustee resigns, provided the trust document specifies this as a contingency for the transition.