Page 72 - Successor Trustee Handbook

CHAPTER 19

TRANSITION TO ANOTHER TRUSTEE

There are a number of situations when a currently acting Trustee (whether the
Trustor, the first Successor Trustee or a later Successor Trustee) is replaced by a new
Trustee. These typically are:

the Trustee no longer desires to act;
the Trustee becomes disabled;
the Trustee is removed;
the Trustee dies; or,
Trust assets are distributed to a new Trust with a different Trustee.

Each of these circumstances involves a different procedure for the transition of
power from one Trustee to the next.

When the current Trustee is no longer willing to act, for whatever reason, he
or she may merely resign. This often happens when the original Trustor becomes elderly
and no longer wishes to handle his or her paperwork and financial decisions. The
Trustee resignation document may be fairly simple. However, there are issues
surrounding a Trustee resignation that need to be dealt with properly. First, the Trustee
should understand that, after resigning, he or she may not be able to again resume the
position of Trustee (either because he or she will become too disabled to do so or the
document does not allow him or her to do so). Second, the Trustee must have the
necessary legal capacity to sign a knowledgeable resignation (if you are in doubt as to the
Trustee’s capacity, you should probably skip ahead to the “doctor letters” procedures
below). Third, the resignation should not be made under any form of influence or
coercion by others, particularly that of a Successor Trustee or a beneficiary of the Trust.
Fourth, it is probably a good idea to have the resigning Trustee’s signature on the
resignation notarized, in case anyone, including a financial institution, should later
question the authenticity of the resigning Trustee’s signature.

If the resigning Trustee is also a Trustor, it may be more advantageous for he or she to sign an
amended Living Trust, which states that the person he or she now wishes to serve as
Trustee has been appointed to serve in that capacity immediately, either solely or as a
Co-Trustee with the Trustor. By doing an amended Living Trust, the Trustor is
affirmatively stating in the document that the next Trustee is to act and therefore there is
less likelihood of other persons questioning the new Trustee’s authority to act. The
Trustor is also spared the emotional disappointment of having to acknowledge his or
her deteriorating capacity, which sometimes occurs when the Trustor has to sign a
resignation.

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