A trust does not end just because a trustee dies. What happens to a trust when a trustee dies? The assets are transferred to the successor trustee, as provided under the trust agreement. What if there is no successor trustee? The beneficiaries or any interested person may petition the court to appoint a successor trustee.
What is a trust?
A trust is an agreement executed by the grantor, transferring assets to the trustee who manages and administers such property for the benefit of the designated beneficiaries. In living trusts, the grantor is also the trustee and the beneficiary. When the grantor-trustee-beneficiary dies, the trust assets are transferred to the successor trustee named in the trust agreement, who then manages it for the benefit of the successor beneficiaries. Trusts are a popular estate planning tool to avoid probate, minimize taxes, and manage and distribute wealth for a long time after death.
Who is a trustee?
A trustee is a person appointed by the grantor to own, hold, and manage the properties of the trust. In the trust document, the grantor usually appoints a trustee and several successor trustees, just in case a trustee dies, becomes incapacitated, resigns, is disqualified, or can no longer serve as trustee. Sometimes, however, the trust document does not provide for many successor trustees, especially when the trust document provides for multiple generations. At one point then, there is no more successor trustee to serve. A trust does not fail, however, due to the absence of a successor trustee.
What happens when the trustee dies?
When the trustee dies, the successor trustee has the obligation to transfer the property to himself. Usually, this requires the submission of the original death certificate of the trustee and an affidavit of death of the trustee. In this affidavit, the successor trustee states under oath that the previous trustee has died, that the previous trustee owned property, and that he is the named successor trustee in the trust document. This would allow the county recorder (in cases of real property) or the bank (in cases of bank accounts) to allow the transfer of property to the successor trustee.
If the trustee who died is also the grantor, then the trust becomes irrevocable. Income from the trust can no longer be reported using the deceased grantor-trustee’s social security number. The successor trustee would need to get a tax identification number for the trust. In addition, the successor trustee needs to file some tax returns that report any income of the grantor prior to death. It is best for the successor trustee to consult with an accountant since properties will need to be appraised as well.
What happens when there is no qualified successor trustee provided in the trust agreement
When there is no more successor trustee provided in the trust agreement, any interested person (i.e., beneficiary) may petition the court to appoint a successor trustee. In New York, this procedure is governed by SCPA § 1502. Under this provision, the court may appoint a successor trustee when there are no other trustees able to act or succeed and it is still necessary to execute the trust. The court, however, will not appoint a trustee if such appointment will contravene the express terms of the trust.
If you would like to execute a trust agreement, you need an affidavit of death, or you need help in transferring properties to yourself as successor trustee, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 718-509-9774 or send us an email at email@example.com.