The same person can serve as trustee during your incapacity and after your death, but that is not always the best choice. A close family member may be well suited to care for you during incapacity, while an impartial person or professional trustee may be better equipped to administer the trust after your death.
The right decision depends on the trustee’s abilities, your family relationships, the complexity of your assets, and the instructions contained in your trust.
Why Do You Need a Successor Trustee?
When you create a trust, choosing a trustee is one of the most important decisions you will make.
If you create a revocable living trust, you may choose to act as the initial trustee. This allows you to retain control over and benefit from the money and property held in the trust.
However, a health condition, injury, or cognitive decline could leave you unable to manage your own affairs. Your trust should explain how incapacity will be determined and identify the person who will take over the trust’s management.
The trust must also name someone to administer or distribute its property after your death.
For these reasons, it is crucial to name a successor trustee. You should also name at least one alternate in case your first choice is unable or unwilling to serve.
What Qualities Should a Trustee Have?
Whether the person will serve during your incapacity, after your death, or in both situations, a trustee should be:
- Honest and trustworthy
- Responsible and organized
- Capable of making financial decisions
- Willing to follow the trust’s instructions
- Able to maintain accurate records
- Prepared to communicate with beneficiaries and professionals
- Capable of handling disagreements impartially
A trustee has a legal duty to administer the trust according to its terms and in the beneficiaries’ interests. For example, the District of Columbia trust statutes address a trustee’s duties of loyalty, prudent administration, recordkeeping, and protection of trust property.
Depending on your circumstances, it may be prudent to name different trustees to serve during incapacity and after death. In other situations, naming the same person may create a smoother transition.
Choosing Different Trustees for Incapacity and Death
The responsibilities of a trustee during your incapacity can be quite different from the responsibilities involved in administering the trust after your death.
Naming different people allows you to select the person best suited to each role.
Choosing a Trustee During Incapacity
During your lifetime, you are typically the primary beneficiary of your revocable living trust.
For this reason, you may prefer to have a spouse, adult child, or another close relative serve as trustee if you become incapacitated. These individuals often know your needs, values, routines, and wishes better than someone outside the family.
In addition to having a legal duty to act in your interest, a close family member may understand how you would want your finances handled. That person may also be better positioned to coordinate your housing, care, medical expenses, and other personal needs.
A family member who serves as trustee may be entitled to reasonable compensation under the trust and applicable law. However, that person may decide not to charge a fee.
During your lifetime, you may be the trust’s only current beneficiary. In that situation, there may be less risk that a family member serving as trustee will be accused of favoring one beneficiary over another.
Coordinate the Trustee With Your Financial Agent
Consider naming the same person to serve as both your successor trustee and your agent under a financial power of attorney.
Your successor trustee generally manages the money and property owned by the trust. Your financial agent manages property outside the trust and may be authorized to pay bills, enter contracts, access accounts, or complete other financial transactions on your behalf.
Having the same person serve in both roles can make financial management easier during incapacity. It may reduce confusion about who is responsible for a particular account or expense.
However, the roles remain legally distinct. The individual must understand whether they are acting as trustee or as your agent for each transaction.
Under Maryland’s statutory financial power of attorney, an agent may be authorized to make decisions involving the principal’s property and money. A Maryland financial power of attorney generally becomes effective immediately unless its terms provide otherwise.
Your trustee and financial agent should be people you know are honest, reliable, and capable of handling financial responsibilities.
Choosing a Trustee After Your Death
After your death, you are no longer the beneficiary of your trust. The beneficiaries are the individuals or organizations you named to receive or benefit from the trust property.
Different considerations may therefore influence your choice of trustee.
If you name your spouse or child, it may be difficult for that person to take on significant administrative responsibilities while grieving. The trustee may need to identify assets, communicate with financial institutions, pay expenses, keep records, file tax returns, and make distributions.
Your chosen trustee must have the time and emotional capacity to perform these duties.
Consider Potential Family Conflict
Family rivalries or disagreements may create additional problems after your death.
If you name one child as trustee, the other children may worry that the trustee will not act impartially. Even when those suspicions are unfounded, they can create tension and make trust administration more difficult.
Similar concerns can arise in blended families. For example, if you have children from a previous relationship and name your current spouse as trustee, your children may worry that they will not be treated fairly.
A trustee responsible for multiple beneficiaries may have a duty to act impartially and consider their respective interests. The District of Columbia Code’s impartiality provision provides one example of this legal responsibility.
Family conflict can arise even among relatives who got along well during your lifetime.
To reduce the risk of disputes, you may want to name someone who can act fairly and impartially. This could be:
- A trusted friend
- A responsible business associate
- A neutral family member
- A professional fiduciary
- A bank or trust company
A professional trustee may be especially helpful when the trust contains complex assets, continues for many years, or benefits family members who do not get along.
Using the Same Trustee During Incapacity and After Death
If there is little risk of family conflict and one person is well qualified for both roles, you may choose to have the same successor trustee serve during your incapacity and after your death.
This approach offers several benefits.
Less Preparation May Be Required
Instead of preparing two people to serve at different times, you only need to familiarize one person with your trust, property, advisors, and financial affairs.
That person can learn where important records are located and understand the trust’s overall purpose before needing to act.
Trust Management May Be More Seamless
If you become incapacitated before your death, the trustee will already be managing the trust when you pass away.
There will be no need to transfer records and responsibilities from an incapacity trustee to a different trustee after death. This continuity can reduce delays and administrative confusion.
The Trustee Already Understands Your Affairs
A trustee who has served during your incapacity may already know:
- Which assets the trust owns
- Where financial records are kept
- Which bills and expenses must be paid
- Who your attorneys, accountants, and financial advisors are
- How you intended the trust property to be used
- Which issues may require immediate attention
Because the trustee is already serving, your death will not force someone new to assume an unfamiliar and potentially stressful role without preparation.
When Might Different Trustees Be Better?
Different trustees may be appropriate when:
- One person is compassionate and attentive but lacks administrative experience.
- The post-death trust will require complex tax or investment management.
- Family members may question another relative’s impartiality.
- The trust will continue for many years after your death.
- One or more beneficiaries have special needs.
- A beneficiary has difficulty managing money.
- The trust owns a business or complicated investments.
- Your preferred incapacity trustee does not want to administer your estate after death.
The trust document can identify one successor trustee to serve during incapacity and another to take over after your death. It should clearly explain when each person’s authority begins and ends.
Should You Name More Than One Trustee?
You may also consider naming co-trustees. Co-trustees can divide responsibilities and provide oversight, but requiring two people to act together can create delays or disagreements.
If you name co-trustees, the trust should address:
- Whether they must act unanimously
- Whether either trustee can act independently
- How disagreements will be resolved
- How responsibilities will be divided
- What happens if one trustee resigns or becomes unable to serve
Naming co-trustees should be a deliberate decision rather than an attempt to avoid choosing between family members.
We Can Help You Choose the Right Trustee
Determining who will serve as your successor trustee is a crucial part of creating an estate plan.
You may need to decide whether to use the same trustee during incapacity and after death, name different trustees, appoint co-trustees, or select a professional trustee.
At McDonald Law Firm, we can help you evaluate the responsibilities involved and choose the arrangement that best fits your circumstances. Our goal is to help you carry out your wishes while reducing the potential for family conflict.
Contact Andre O. McDonald, a knowledgeable Howard County, Montgomery County, and District of Columbia estate planning attorney, to schedule an appointment:
- Howard County: 443-741-1088
- Montgomery County: 301-941-7809
- District of Columbia: 202-640-2133
You may also request a consultation online.
DISCLAIMER: THE INFORMATION POSTED ON THIS BLOG IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND IS NOT INTENDED TO CONVEY LEGAL, INSURANCE, OR TAX ADVICE.
