A successor trustee is a person who succeeds or replaces a previous or former trustee, because such previous or former trustee has died, resigned, was suspended, removed, or for any other reason, is unable to act.
This is in contrast to a trustee, who is a person appointed by the trustor or grantor (the creator of the trust) to own and manage the trust assets for the benefit of beneficiaries.
Under EPTL § 7-2.6, a trustee may resign or be suspended or removed by the court on the application of an interested person due to a violation of the trust, insolvency, or unsuitability to execute the trust.
Usually, the trust agreement will provide for the mechanism of appointing a successor trustee, such as an appointment by a prior trustee or a protector or by a majority vote of the beneficiaries. However, if there is no method provided in the trust agreement, the court may appoint a receiver or other officer under its direction. EPTL § 7-2.6.
If the trust is a testamentary trust, however, the appointment of the successor trustee is done through an application with the Surrogate’s Court.
To succeed a previous trustee, the successor trustee has to ensure that he is indeed the successor trustee. There is a need to refer to the trust document to see who the successor trustee is and what kind of powers and authority the successor trustee has.
Since a trustee is the legal owner of trust assets, when a previous or former trustee dies or is replaced for whatever reason, the successor trustee will be the new legal owner of the trust assets. There is a need to transfer ownership over the trust assets to the new successor trustee.
If the previous trustee died, establishing authority as the new successor trustee is simple by just submitting the death certificate of the previous trustee and proof that you are the successor trustee (usually through an affidavit or certificate of trust where you affirm you are the successor trustee under penalty of perjury).
For example, if the trust asset is real property, the real property will be in the name of X, Trustee of ABC Trust. If X died and you are the successor trustee, you need to transfer the real property from X to you, Trustee of ABC Trust. Since real property transfers are recorded with the local government and approved by the title examiner, the examiner will request proof that the previous trustee has died and you are the successor trustee with legal authority to transfer the real estate to you.
If the trust asset is a bank account, the bank account will be in the name of X, Trustee of ABC Trust. If you are the successor trustee and you need to transfer the bank account in your name, the bank will also ask for relevant documents constituting proof that the previous trustee died and your authority as successor trustee.
It becomes a little bit more difficult to prove you have authority as successor trustee when the previous trustee did not die but instead became incapacitated. In this case, the trust agreement will provide for the evidence required to prove that the previous trustee was incapacitated, allowing you as successor trustee to step in. Normally, you will need a certificate from the previous trustee’s physician that such trustee is incapacitated and incapable of managing the affairs of the trust.
If you run into problems regarding transfers of property to a successor trustee, a trust and estates lawyer, like us, can help you.
In revocable trusts, the grantor is the orignal trustee and the person who takes over the trust after the grantor dies is the sucessor trustee.
Many trusts are revocable trusts because many grantors do not like to relinquish control over their property until their death. A revocable trust allows the grantor to continue possessing and owning the property during his lifetime and to change the trustee and the beneficiary at any time prior to his death. It is only when the grantor dies that the trust becomes irrevocable.
In most revocable trusts, the grantor designates himself also as trustee and beneficiary. This allows the grantor to exercise absolute control over his property during his lifetime. The grantor then designates successor trustees and successor beneficiaries who will succeed him upon his death, incapacity, or for whatever triggering event the grantor might like.
Example 1: X establishes ABC trust where X names himself as trustee and beneficiary. In order for the trust to be effective, X needs to transfer property to ABC Trust. X transfers his house to the trust. A new deed is registered, transferring the house from X to X, Trustee of ABC Trust.
In the trust document, X names you as successor trustee, and his children, B and C, as successor beneficiaries. You are to succeed as trustee upon his death or incapacity, whichever comes earlier.
If X dies, you need to submit a deed to the title examiner in the local government, transferring the house from X, Trustee of ABC Trust to you, Trustee of ABC Trust. The title examiner will request proof that X is no longer the trustee of ABC Trust and you are the successor trustee. To prove death, you can submit the death certificate. To prove your status as successor trustee, you can submit an affidavit. A trust and estates lawyer, like us, can help you prepare the relevant documents for the transfer.
Example 2: Same facts as above, except that X named his spouse, Y, as successor trustee. There was no other successor trustee named and no other method to choose a successor trustee. At the time of X’s death, Y was already in a Medicaid-certified nursing care facility and would not be able to manage the trust. You are X’s child, one of the named successor beneficiaries. What is your remedy? You need to file an application with the court for the appointment of a successor trustee since the trust was created during the lifetime of X. If the trust was created in X’s will, the application is filed with the Surrogate’s Court.
The appointment and transfer of trust properties to successor trustees are usually more complex than the appointment of the original trustee. In the appointment of an original trustee, the mere transfer of ownership of the trust properties to the trustee is enough evidence of the appointment of a trustee and the trustee’s acceptance of the trust. For successor trustees, they need to strictly follow the procedures outlined in the trust document in order to step in as a trustee. If the trust document is silent, the grantor’s intentions are inferred from the general terms of the trust agreement.
There is more about rules governing successor trustees in EPTL § 7-2.6.
If you are a successor trustee who needs assistance in the transfer of trust properties in your name or you are a beneficiary who needs to have a successor trustee appointed or if you have any issues regarding a trust document, we at the Law Offices of Albert Goodwin are here for you. We have represented both trustees and beneficiaries in many cases involving different issues. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].