623-229-0463 
Trusts are powerful tools that can serve many functions in your estate plan, but you’ll have to make some difficult choices when you establish one, including who will serve as the trustee managing the assets held in the trust. Since the trustee is critical to the ongoing operation of the trust, it’s also a good idea to name a successor who can step in if the original trustee passes away or otherwise becomes unable to manage the trust.
The seasoned trust lawyers at Pennington Law, PLLC, can help you plan for every contingency. Call our law office today for your free initial consultation, and we’ll explain your options.
What Is a Successor Trustee?
When a person creates a trust, they appoint a trustee to manage the trust’s assets for the benefit of the beneficiaries, in accordance with the terms set out in the trust document. The trust-maker can also name a successor trustee to take over if the initial trustee is unable or unwilling to fulfill their duties.
When Does a Successor Trustee Step In?
The role of a successor trustee is to carry out the trustee’s duties when the trustee is unable to perform them. In a revocable trust in which the trust-maker has named themselves as trustee, the successor trustee becomes trustee upon the trust-maker’s death.
In an irrevocable trust, the successor trustee has no responsibilities until the trustee can no longer fulfill their duties. Upon the trustee’s death, incapacity, resignation, or removal, the successor trustee steps into the trustee’s shoes.
Do I Need a Successor Trustee for My Trust?
Under Arizona law, you don’t need to designate a successor trustee to create a valid trust. Still, the law allows the appointment of a successor trustee when a vacancy occurs in the trusteeship. However, it’s wise to consider including a successor trustee in your original trust instrument for several reasons.
A revocable trust that becomes irrevocable upon the grantor’s death will need a successor trustee to manage the trust and carry out its terms. While it is strongly recommended to name a successor trustee to ensure smooth administration, Arizona law allows the court to appoint a trustee if none is designated, so a successor trustee is not legally required. However, if you name a successor trustee in the original document, there will be no delay in the management of the trust while a successor trustee is appointed.
If you have created an irrevocable trust, the same logic applies. If the trustee becomes unable to serve, having a successor trustee named in the trust instrument prevents delays that could block the trust’s business, as the successor trustee can immediately assume the trustee’s duties.
What Happens If I Don’t Name One?
If you have named no successor trustee, state law governs the process of acquiring a successor trustee. The law requires any trustee vacancy to be filled in this order:
- A person unanimously agreed upon by the qualified beneficiaries
- Someone appointed by the court
If the beneficiaries choose, they can appoint a successor if they unanimously agree upon one. They first need to review the trust instrument to see if it outlines a procedure for appointing a successor. If not, the beneficiaries must all sign a written notice of substitution of trustee. This document will contain their acknowledgement that they agree to the successor trustee. Next, they’ll record the appointment at the county recorder’s office where the trust property is located. There may be more than one county involved.
When the court fills the vacancy, it will consider the trust-maker’s objectives in creating the trust, the ability of the prospective successor trustee to properly administer the trust, and the interests of the beneficiaries. The court has the authority to appoint an additional trustee or a special fiduciary if it believes the trust will be best served by adding them.
What Does a Successor Trustee Actually Do?
The successor trustee assumes the trustee’s duties. The trustee acts as a fiduciary for the trust. That means they are legally and ethically bound to put the interests of the trust and its beneficiaries first. They cannot borrow money from the trust or buy or sell anything from or to the trust unless permitted by the trust agreement or approved by a court.
The trustee also has a duty to act as a prudent person would when dealing with the trust’s property. This is about the trustee’s behavior, not about how the market affects the value of the trust’s properties. The trustee must act as a reasonable person would in the same circumstances if they had the same information available to them at the time the action was taken.
Typical successor trustee duties include:
- Manage the trust assets: The successor trustee must manage and invest the trust’s assets in accordance with the trust instrument and their fiduciary duties.
- Appraise and distribute assets: The successor trustee must appraise the value of all the trust’s assets. They must pay any debts and taxes that are due. The successor trustee must distribute the trust’s assets to the beneficiaries according to the terms of the trust instrument.
- Handle administrative tasks: For irrevocable trusts, the successor trustee must prepare an annual accounting of the trust’s assets and activities for the qualified beneficiaries. Additionally, if the trust owns any life insurance policies, the successor trustee must collect the payouts.
How Do I Choose the Right Successor Trustee?
You should approach choosing your successor trustee just as seriously as you selected your trustee. If the trustee can’t act, you’ll be entrusting the care of all your assets-in-trust to the successor trustee. You need someone with integrity, a strong sense of responsibility, good financial aptitude, and the willingness to take on such an intensive task.
In many cases, people choose a trusted friend with financial or business experience to serve as a successor trustee. However, you can also select a corporate trustee, a trust company, a financial institution, or a combination of co-trustees (such as an individual and a bank) to carry out the duties together.
Before you create a trust and select your trustee and successor trustee, get in touch with an experienced Arizona estate planning lawyer for decision-making guidance. You should also discuss the responsibilities of a successor trustee with a potential candidate. You don’t want to spring the duties on them without their consent or confirming that they have the time or capacity to take on the role.
Contact an Arizona Trust Lawyer Today
At Pennington Law, PLLC, our skilled legal team can help you with all aspects of estate planning, including the creation of trusts to preserve your assets and facilitate a smooth transition to your beneficiaries.
We understand that putting your assets in someone else’s hands can feel overwhelming, which is why our trust and estates attorneys carefully review the appointment of potential trustees and successor trustees with you. Our goal is to help you make decisions that provide peace of mind, knowing your financial affairs are in order and your wishes will be carried out exactly as you intend.
