Learning that you have been named as a successor trustee does not necessarily mean you must begin managing the trust immediately. Your authority generally starts only after the circumstances described in the trust document have occurred and you accept the role.
What happens next depends partly on why the previous trustee can no longer serve. Taking over because of incapacity may involve managing property for the original trustee’s benefit, while taking over after death often begins a broader trust-administration process.
Before accessing accounts, paying expenses, or making distributions, a successor trustee should confirm their authority and understand what the trust requires.
Confirm Why Your Authority Has Begun
A successor trustee may take over when:
- The original trustee dies
- The original trustee becomes incapacitated
- The original trustee resigns
- The original trustee is removed
- Another event described in the trust occurs
The trust document should explain how a successor trustee is selected and what must happen before that person can begin serving.
For example, a trust may require incapacity to be established through written medical opinions. If the prior trustee has died, a certified death certificate may establish that the succession provision has been triggered. A resignation or removal may require different documentation.
Being listed as successor trustee does not require someone to accept the position. Before taking action, the proposed trustee should consider the trust’s assets, beneficiaries, expected workload, potential conflicts, and whether professional assistance will be needed.
Review the Trust Before Acting
One of the successor trustee’s first steps should be reading the complete trust document and any amendments.
Important provisions may explain:
- When the successor trustee’s authority begins
- Which property the trust owns
- Who the beneficiaries are
- Whether the trust can still be amended
- How income and principal may be used
- Whether distributions are required or discretionary
- Whether separate trusts must be created
- What powers the trustee may exercise
- Whether a co-trustee or trust advisor is involved
- How trustee compensation is determined
- When the trust terminates
The trustee should avoid relying on a summary from a family member or assuming that all living trusts operate the same way. The signed trust and its amendments control the administration.
Gather the Documents Needed to Establish Authority
Banks, investment companies, title companies, and other institutions may request evidence that the successor trustee is authorized to act.
Depending on the circumstances, the trustee may need:
- The signed trust and amendments
- A certification or certificate of trust
- The former trustee’s resignation
- Documentation establishing incapacity
- Certified copies of the death certificate
- Personal identification
- Existing account statements
- Deeds and ownership records
- Tax returns and financial records
After the original trustee’s death, the trust may also need its own taxpayer-identification number and appropriately titled financial accounts. The successor trustee should coordinate these steps with legal and tax professionals rather than continuing to use the deceased person’s identifying information without guidance.
Understand How Incapacity Administration Differs From Administration After Death
The successor trustee’s responsibilities depend significantly on whether the person who created the trust is living.
If the Original Trustee Is Incapacitated
When the successor trustee takes over because of incapacity, the trust may remain revocable. The trustee may be responsible for using trust property to support the incapacitated person according to the trust’s instructions.
This may involve:
- Paying housing and living expenses
- Managing bank and investment accounts
- Maintaining real estate
- Coordinating with an agent under a financial power of attorney
- Paying healthcare or caregiving expenses
- Keeping property insured
- Maintaining detailed records
The successor trustee generally should not begin distributing inheritances simply because they have taken control. The person who created the trust is still living, and the trust property may still be needed for that person’s care.
The trustee should also determine whether the original trustee may resume control if capacity returns and what documentation the trust requires for that transition.
If the Original Trustee Has Died
After death, a formerly revocable trust commonly becomes irrevocable. The successor trustee may then need to identify beneficiaries, address expenses and tax matters, determine what property the trust owns, and carry out the distribution instructions.
The trustee may also need to coordinate with the personal representative of the probate estate. These roles may be filled by the same person, but they remain legally distinct.
The personal representative administers probate property. The successor trustee administers property owned by the trust. Close coordination may be necessary when expenses, creditor claims, taxes, or assets involve both.
Identify and Secure Trust Property
A successor trustee cannot properly administer a trust without determining what it owns.
The trustee may need to locate and confirm ownership of:
- Bank accounts
- Investment accounts
- Real estate
- Business interests
- Vehicles
- Valuable personal property
- Mineral or royalty interests
- Notes or loans payable to the trust
- Other titled property
Assets should not be treated as trust property merely because they are mentioned in an estate-planning binder. The trustee should confirm how each asset is legally owned and whether it was transferred to the trust.
The trustee may also need to secure property by changing account access, maintaining insurance, protecting a residence, collecting income, arranging appraisals, or preventing unauthorized removal of personal belongings.
An initial inventory can provide a foundation for later accountings, tax work, and beneficiary distributions.
Notify Beneficiaries and Establish Communication
Colorado trustees have duties to keep qualified beneficiaries reasonably informed about trust administration.
Depending on the trust and circumstances, required notices may include:
- Notice that the successor trustee has accepted the position
- The trustee’s name and contact information
- Notice that a formerly revocable trust has become irrevocable
- Information about the beneficiary’s right to request relevant portions of the trust
- Information about the right to receive trustee reports
Certain notices generally must be provided within 60 days. Determining who qualifies as a beneficiary entitled to notice and what information must be supplied can require careful review of the trust and Colorado law.
Beyond formal notices, the trustee should establish a practical communication process. Beneficiaries may want immediate answers about distributions, but the trustee may first need to locate property, obtain values, resolve expenses, and complete tax work.
A clear initial update can explain what is known, what remains under review, and when beneficiaries can expect additional information.
Create a Recordkeeping System
Trust property must be kept separate from the successor trustee’s personal property.
Early in the administration, the trustee should establish a system for tracking:
- Trust assets and values
- Income received
- Bills and expenses
- Property sales
- Professional fees
- Trustee compensation
- Tax payments
- Distributions
- Communications with beneficiaries
- Decisions involving investments or property
Receipts, statements, invoices, appraisals, and correspondence should be retained. Detailed records help the trustee prepare required reports and explain how trust property was handled.
Colorado law generally requires certain beneficiaries to receive trust reports at least annually and when the trust terminates. Those reports may include trust property, liabilities, receipts, disbursements, trustee compensation, and asset values when feasible.
Address Expenses, Taxes, and Other Obligations
A successor trustee should not assume that every trust asset is immediately available for distribution.
After death, trust administration may involve:
- Funeral or final expenses
- Property-maintenance costs
- Professional fees
- Income taxes
- Trust tax returns
- Appraisals
- Insurance expenses
- Debts or creditor claims
- Expenses shared with the probate estate
Property held in a revocable trust may still be subject to certain claims and allowances after the person who created the trust dies. The trustee should obtain guidance before paying disputed obligations or distributing assets that may be needed later.
Reserving sufficient funds can help prevent the trustee from having to recover money or property from beneficiaries.
Do Not Rush Beneficiary Distributions
Beneficiaries may expect the trust to avoid probate and therefore assume distributions should occur immediately. Avoiding probate does not eliminate the administrative work required to settle a trust.
Before making final distributions, the successor trustee may need to:
- Confirm all trust property
- Obtain reliable asset values
- Review distribution instructions
- Resolve expenses and tax issues
- Determine whether property should be sold or distributed directly
- Establish continuing trusts for certain beneficiaries
- Calculate appropriate reserves
- Prepare an accounting
- Obtain necessary receipts or documentation
Some trusts permit partial distributions while administration continues. Whether that is appropriate depends on the trust’s terms, available assets, unresolved obligations, and the needs of the beneficiaries.
Determine Whether the Trust Ends or Continues
Not every trust terminates shortly after death.
The trust may direct the successor trustee to distribute property outright. It may instead require assets to remain in trust for:
- Minor children
- Beneficiaries with disabilities
- A surviving spouse
- Beneficiaries who have not reached a specified age
- Long-term property or business management
- Other purposes established by the person who created the trust
If the trust continues, the successor trustee’s role may last for years. Ongoing administration can involve investing assets, evaluating distribution requests, preparing tax returns, sending reports, and balancing the interests of different beneficiaries.
The related article What Responsibilities Does a Trustee Have? explains these broader, continuing fiduciary responsibilities in more detail.
When Should a Successor Trustee Seek Guidance?
A successor trustee may benefit from legal, tax, financial, or valuation assistance when:
- The trust’s instructions are unclear
- Incapacity must be established
- Trust property was not properly titled
- The trust owns real estate or a business
- Creditor or tax questions arise
- Beneficiaries disagree
- The trustee is also a beneficiary
- Property must be divided among multiple beneficiaries
- A beneficiary’s trust will continue
- Probate and trust administration overlap
- The trustee is considering declining or resigning from the role
Seeking professional assistance does not transfer the trustee’s responsibility to someone else. It can help the trustee make informed decisions and complete unfamiliar tasks appropriately.
Begin With the Trust and a Clear Plan
A successor trustee’s first responsibility is not to distribute property. It is to confirm their authority, understand the trust, identify the assets, communicate with beneficiaries, and establish an organized administration process.
The exact steps differ depending on whether the original trustee is incapacitated, deceased, or simply no longer willing to serve.
Mason Law & Planning Group assists families with Trust Planning Services and helps successor trustees understand the administration process. If you have been named as a successor trustee or are selecting one for your own plan, contact Mason Law & Planning Group to schedule a consultation.