Sequence of Trustees

There is a sequence of three trustees in most trust documents. The initial trustee serves while you are living; typically this is yourself. Then you need to name a successor trustee to serve after you are gone. Finally, you should name a second successor trustee to serve in the event that the first successor is not available or willing to do so.

The Initial Trustee

Although most people name themselves as the initial trustee, this isn't always the case. You might name someone else to serve as the initial trustee because you are nervous about managing your own property. This could be because your health is failing, or your property is sufficiently complicated that you feel someone else could manage it better. If the latter applies to you, you should consider naming a professional trustee.

You usually name yourself as the initial trustee because you want to maintain 100 percent control of your property, and you feel you are competent to manage it. But there is no rule that says you have to.

There are numerous options for you to choose from if you want a professional trustee. The best place to look is your local bank. Most banks maintain a trust department. The nice thing about this choice is that your local bank controls your accounts, and that makes it easier for them to be of service to you.

If you don't want to use your bank, there are trust companies whose sole function is to manage trust assets and act as trustees. Most brokerage companies can also serve as trustee for you. The advantage of naming a professional trustee is that your assets are professionally managed. Just be sure to ask for a fee schedule before turning over management of your trust.

Successor Trustee

The second in the sequence of trustees is called a successor trustee. This is the person or entity that will serve as successor trustee when the initial trustee is not available to serve. When you serve as your own initial trustee, there must be a successor trustee who can serve after you are gone.

Banks and trust companies frequently charge hefty fees for managing a trust. Check with your bank first, before naming it in your trust, to determine the management fees and the minimum annual charge for overseeing your trust. Also ask whether there is a minimum trust amount that it will manage.

Deciding who will be your successor trustee is not easy. However, this chapter will guide you through the duties and responsibilities of a trustee, which should help you decide who would serve your plan best.

Second Successor Trustee

The third in the sequence of trustees is still called a successor trustee, but it is the second successor trustee. This is the person or entity that will serve as trustee if your first successor trustee is not available.

If you name a professional trustee such as a bank, a trust company, or a brokerage firm to serve as your initial trustee, you don't usually need to name a successor trustee because the professional trustee won't die or become unavailable to serve. As has occurred in recent months, however, institutions sometimes fail or go out of business. Your trust should include language reserving the right to change trustees as well as allowing another institution to take over as trustee in the event of a failure.

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