What Happens When the Trustee of a Revocable Trust Dies?

When you establish a revocable trust as part of your estate plan, you will also need to name someone to manage the trust on behalf of its beneficiaries. This individual is called the trustee. In Arizona, you can structure a trust so that the duration of the trustee’s management is set for a certain period or lasts indefinitely. But what happens if your trustee dies during your lifetime? You may need to take steps to safeguard the trust and its long-term viability when the trustee of a revocable trust dies.

What Does a Trustee for a Revocable Trust Do?

The trustee of a revocable trust manages the trust per the terms of the trust document written by the creator of the trust (the grantor). A trustee receives and holds assets placed into the trust by the grantor. The trustee must maintain capital assets placed in the trust, such as real estate, or can invest cash or other liquid assets in the trust. The trustee may sell property in the trust, buy assets, or make new investments for the trust. The trustee must also distribute principal and income from trust assets to beneficiaries as required by the trust document.

Frequently, trusts are structured to include the name of a successor trustee. This person can assume trust management responsibilities if the original trustee passes away or becomes incapacitated. Trusts can also specify a process for appointing a new successor trustee if the existing one cannot serve.

Immediate Steps After the Trustee’s Death

One of the first steps the grantor and beneficiaries of a revocable trust should take after the trustee’s death is to notify the successor trustee that they must assume trustee duties. However, if the trust document does not name a successor trustee, the trust’s beneficiaries may need court intervention to appoint a new successor trustee.

Related: Key Qualities for Selecting a Trustee for Your Arizona Estate

Responsibilities of the Successor Trustee

A successor trustee’s duties include:

• Reviewing the trust document to understand their responsibilities, authority, and discretion
• Inventorying the trust to understand what assets it holds
• Paying past due bills and expenses
• Filing tax returns and paying taxes on behalf of the estate
• Making distributions to beneficiaries as directed by the trust document

What Happens If No Successor Trustee Is Named?

When a trust document does not name successor trustees for a revocable trust, the trust’s beneficiaries must petition the court to appoint a successor trustee. The trust cannot function without a court-appointed successor trustee, as no one can manage the trust’s assets or make distributions. The beneficiaries can advocate for selecting a specific individual to serve as the successor trustee. However, the court may appoint a professional trustee, such as an attorney, accountant, financial advisor, or trust company, to serve as the successor trustee.

Tax Implications If a Trustee Dies

The tax implications upon the death of a trustee will depend on whether the grantor has also died. In some cases, the person who creates a revocable trust will name themselves as trustee to manage their assets for their beneficiaries. If the grantor still lives, the trust will pay taxes in the ordinary course of business.

However, if the grantor has died and has a large estate per IRS guidelines, federal estate taxes may come due as assets in a revocable trust constitute part of the grantor’s estate for estate tax purposes. An experienced Arizona trust attorney can advise successor trustees and beneficiaries of what comes next after reviewing the existing trust document.

Talk to an Arizona Estate Planning Lawyer Today

Has the trustee of your revocable trust passed away? If so, you need experienced, highly rated legal counsel to walk you through the next steps. Contact the seasoned professionals with Pennington Law, PLLC today for an initial consultation to learn about what to do after the death of a trustee.