Page 74 - Successor Trustee Handbook

Finally, the current Trustee may be effectively replaced when distributions are required
to be made from the Trust to another Trust (either created out of the original Trust, or
under a separate trust document) and a different Trustee is named. (See the Chapter,
“Making Distributions to the Beneficiaries” and “Termination of the Trust”).

Regardless of the circumstances that may cause the change of Trustee, the remaining
process of the new Trustee taking over involves substantially the same steps. First, you
must confirm that the right person(s) is stepping in as the next Successor Trustee. This
requires consulting the Trust document. Sometimes, there is no Successor Trustee named
in the document. For example, there may have been two Successor Trustees named in
the document, but both are no longer able to act or are deceased. The Trust will usually
provide some mechanism for determining the next Trustee without the need to go into
court. For example, the Trust may say that the last Trustee to act may appoint a
Successor (sometimes the type of party that can be appointed may be limited to a bank
or Trust company or someone who is not a beneficiary of the Trust). This mechanism may
not work if there is no living and competent Trustee who can make this appointment or if
the last Trustee to act does not wish to take on the responsibility of making this
appointment. The Trust may contain a second default mechanism, whereby the current
Trust beneficiaries (entitled to income and/or principal at the current time) may by a
vote appoint a new Trustee (again, the power may be limited to appointing only certain
types of parties). Another default mechanism that could exist is for a “panel” or a “Trust
Protector” to appoint a new Trustee to fill the vacancy. If all of these mechanisms fail or
are not available under the Trust document, then it may be necessary to file a petition
with the Probate Court and have the court appoint the next Trustee.

Assuming it has been clearly resolved who may legally act as the Successor Trustee,
and you have the legal documents setting forth the circumstances under which the
current Trustee can no longer serve (the resignation, doctor letters, death certificate,
removal document, etc.), the following steps need to take place to finalize the transfer
of Trusteeship. First, the new Trustee should sign an “Acceptance of the Position of
Trustee”, which should also be properly notarized, to evidence his or her agreement to
serve as the new Trustee. Second, the attorney should prepare a new “Trust
Certification”, stating that the Successor Trustee is empowered to act pursuant to the
terms of the Trust. This Trust Certification should have attached to it the above referred
legal document establishing the occurrence of the need for a change of Trustee, as well
as a copy of the Trust document, including any amendments. A Trust Certification will
often be needed when the new Trustee goes to third-parties (banks, brokerage houses,
realtors, IRA custodians, etc.), in order to take over control of the Trust assets. Next, the
new Trustee may be required under state law (as is the case in Florida) to send a
“Notification” of the change of Trustee to the Trust beneficiaries (See the Chapter, “Your
Trustee Duties”). Next, it is advisable (and in certain Trust documents, may be required)
for the new Trustee to provide a “HIPAA Authorization” to the next named Successor
Trustee. This authorization to access the new Trustee’s medical records may be limited in
scope so that the next Successor Trustee can only see the records for the purposes of
establishing the disability of the new Trustee (should that occur in the future); this will
enable the next Successor Trustee to act more quickly when needed, without first going
to Court. The outgoing Trustee may be required to provide an Accounting of the assets,
income and expenses of the Trust during that Trustee’s control of the Trust (See the
Chapter, “Accounting to the Beneficiaries”).
71