When you draw up a trust to protect your assets, you also protect your heirs’ future. You may act as a trustee of your own revocable trust. However, your successor trustee will handle the trust after you die. It’s crucial to name a qualified successor trustee since they will distribute your assets to your beneficiaries. Let’s look at what a successor trustee is and when they manage your trust assets.

What Does the Successor Trustee Do?

A revocable living trust acts much like a will and helps your estate avoid probate court. Depending on the type of trust you open, you may have named yourself trustee. As trustee, you manage your trust, decide beneficiaries, and add or remove assets at will.

However, a revocable living trust’s management passes to your successor trustee when you pass away. Your successor trustee settles of your estate like the executor for a will. However, they use your trust’s terms to distribute assets instead of your will.

It’s a good idea to draw up a pour-over will that places all of your assets into the trust when you die. That way, you have no remaining assets outside the trust that would go into the probate process. After your death, your successor trustee then manages the distribution of your estate assets according to the trust’s terms.

Another Type of Trust

If, instead of a living revocable trust, you draw up an irrevocable trust with your attorney, the process works differently. With an irrevocable trust, you do not act as your own trustee while living. 

Instead, with an irrevocable type of trust, you go ahead and name a trustee while living. That same trustee manages your estate when you pass away. If that trustee steps down or dies, your successor trustee will step in. 

Living revocable and irrevocable trust types have benefits that work for your estate when you pass away. 

Trust Benefits

A successor trustee manages the benefits of a Living Trust after your death, including:

No Probate Costs 

Your estate does not go into the probate process or need an executor to handle the distribution of your estate. Instead, your successor trustee distributes your estate according to the trust’s terms. There is no court interference in your estate’s distribution, and the entire process is free from the prying eyes of the public. 

Disabled or Special Needs Heirs

If you have disabled or special needs heirs you’d like to help, giving a lump sum inheritance could make them lose crucial government benefits such as SSD, SSI, and Medicaid. Losing these benefits can cause them to lose health insurance, transportation help, and living expenses they desperately need. 

Instead, with a trust, you can give monthly amounts below the eligibility limits for their program. In this way, you can help rather than hurt your beneficiaries. Your successor trustee is responsible for distributing the funds in the way your trust describes. 

What Type of Trust Do I Need?

Drawing up a trust agreement with your estate planning attorney involves thinking about many questions, such as:

• Will I need access to this money before I die, or can I set up terms that I can live with for the rest of my life?
• How much of this money will I need to give myself each month?
• Who else needs to benefit from this trust?
• Do I want to qualify for Medicaid to cover my long-term care expenses?
• Who will I name as my successor trustee?
• How will my successor trustee distribute my estate after I die?

Irrevocable Trusts and Successor Trustees

If you choose not to be your own trustee and instead open an irrevocable trust, your role is a bit different, and you receive additional benefits. An irrevocable trust is its own legal entity. It no longer legally belongs to you but is managed by the trustee you appoint, even while you are living. 

You may not manage an irrevocable trust as the trustee yourself and may not change the terms of the trust or remove assets at will. If the trustee you appoint to manage your irrevocable trust steps down or dies, your appointed successor trustee will step in. 

An irrevocable trust has more benefits than a living irrevocable trust. Depending on how you set up your irrevocable trust, you may protect your estate assets from:

Bankruptcy

With an irrevocable trust, you protect your assets while living from bankruptcy. However, you must set up the trust before you owe the creditors, or the court could overturn your trust.

Your heirs may also benefit from bankruptcy protection. If you give an heir a lump sum inheritance, they may spend it recklessly or not have it when they need it. However, if their trust fund only gives a yearly stipend, the assets in the trust stay protected from any bankruptcy proceedings. 

Creditors

Probate court is a public process where fraudulent creditors may take notice of your estate. They can submit false claims on your estate. However, with a trust, your successor trustee privately handles your estate without the public eye or greedy family members swooping in to file frivolous lawsuits. 

Heirs’ Careless Behavior or Addictions

You can set up a trust to give monthly stipends to a careless spender or a loved one with an addiction. You could also make payouts conditional upon completing drug rehabs or paying down a credit card. You could specify that they only receive monthly payments once they’ve had a clean criminal record for three years or that they may receive the inheritance only with a full-time job for at least six months.

Divorce Settlements

If you want to give a lump sum to a child but are worried they may divorce in the future, you may open a trust fund to give money to them monthly or yearly instead. Or you may give property only in their name with the condition that they may not add their spouse’s name to the property. If you give a lump sum to a child who puts that money into a family home with her husband, a court will consider that joint home property in a divorce settlement. Likewise, a joint bank account is a marital property, even if one spouse received most of the monies from her grandmother.

NC Medicaid Recovery Costs

It is a shock to families when they understand that they must sell the family home to pay back Medicaid for their parents’ long-term care expenses. With an irrevocable trust, your family home stays safe from these claims.

Successor Trustee Role

Your Successor Trustee administers an estate after you die or administers an irrevocable trust after the first trustee is no longer there. Whoever your trustee is, they are responsible for 

• Paying the trust’s taxes
• Distributing the assets to the beneficiaries
• Investing per the trust terms
• Managing any issues that come up

Naming someone you trust who has administrative skills is of the utmost importance. Often grantors (the person who sets up and funds the trust) will choose to name an entity such as a bank or investment firm to manage a trust because of their reliability. 

We Can Help

At Vail Gardner Law, we stay up to date on the types of trusts that will maximize your assets now and in the future. Our asset protection estate planning strategies can help you grow your funds for your loved ones’ future. We have the legal frameworks you need to keep your assets safe and protected no matter your financial goals. Contact us today to learn how we can help you leave a legacy.