Successor Trustees

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samsmith
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Successor Trustees

Post by samsmith »

I wonder if people have had experience in changing trustees for trust accounts and having that accepted by brokerages. Assume I am the sole trustee of a properly drafted trust. The original trust named successor trustees as well as a mechanism (basically a one page form drafted by the lawyer) to appoint new and remove original successor trustees as life events unfolded. The trust has a brokerage account. Does anyone know if any brokerages will somehow “list” the successor trustees in their system? I checked with my current one and they won’t.

So I am worried that when I die, the brokerage may hassle the successor trustees and not “appove” them and/ somehow claim the successor trustee form that was filled out and signed was is not “acceptable” to them? But they won’t look at it now to make sure its OK – because they don’t list successor trustees in their system. They claimed they had a process in place to deal with the death of a sole trustee of a trust, but two calls produced conflicting explanations and the sense that some “backroom” person would decide at the time.

Wondering if anyone has an experience or anyplace that will clearly list the successor trustees – so in the event of a sole trustee death – only a death certificate would be needed?

Any thoughts?
RadAudit
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Re: Successor Trustees

Post by RadAudit »

Just got out of the lawyers yesterday afternoon after changing a successor trustee.

If your trust was properly written, I'm sure it provides for documents so the trustee(s) can divide your estate in accordance with your directions. I'm sure the lawyer has seen this issue before.

Call your lawyer and ask him how this all works.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.
bsteiner
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Re: Successor Trustees

Post by bsteiner »

samsmith wrote:I wonder if people have had experience in changing trustees for trust accounts and having that accepted by brokerages. Assume I am the sole trustee of a properly drafted trust. The original trust named successor trustees as well as a mechanism (basically a one page form drafted by the lawyer) to appoint new and remove original successor trustees as life events unfolded. The trust has a brokerage account. Does anyone know if any brokerages will somehow “list” the successor trustees in their system? I checked with my current one and they won’t. ...
If you're the trustee now, no one knows who will become the trustee when you cease to act as trustee. Even if you or the original grantor or testator named a successor, that person might not be living when you cease to act, or that person might not accept the job.

The key is to make sure that the Will or trust agreement provides a mechanism for appointing successor trustees, and that if you're the sole trustee, if there's no designated successor, and you have the power to name a successor, that you name one.

Your successor shouldn't have any problem dealing with the financial institution. He/she will probably have to give them copies of the documents showing that you're no longer acting as trustee, and that he/she was validly appointed and is now the trustee.
Topic Author
samsmith
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Re: Successor Trustees

Post by samsmith »

The key is to make sure that the Will or trust agreement provides a mechanism for appointing successor trustees, and that if you're the sole trustee, if there's no designated successor, and you have the power to name a successor, that you name one.

Your successor shouldn't have any problem dealing with the financial institution. He/she will probably have to give them copies of the documents showing that you're no longer acting as trustee, and that he/she was validly appointed and is now the trustee.
The trust definitely has a mechanism to appoint successor trustees (Current trustee with consent of trust protector can appoint). The original lawyer also gave me a template form that I could use to appoint new successor trustees when trust formed about 15 years ago. I have now done this and named my kids as successor trustee. I have had the original successor trustee (parents resign as successor trustees) as they are now aging. So I have the forms done. But they are "just" pieces of paper with multiple signatures and wording explaining per specific articles in the trust that I was appointing successor trustees and the successor's signed as accepting. There was no place on the form to have them notarized. Does that matter? Actually, I have a different trust drafted by a different lawyer, but same issue regarding changing trustees and there was also no notary on similar type form - so maybe notary not needed if everyone signs?

My angst was calling a brokerage and getting different people telling me different things on how they would handle things if I was not around. One guy said the trust would have to be amended. Another kept on saying they would look to the original trust for successor trustees and could not seem to understand the concept that the successor trustees had changed over time. Hopefully Bruce is right that they will accept the paperwork at the right time, but the vague inconsistent answers were concerning.

One thought I had was telling my kids to go a different new brokerage when the time came. Then open a new account at the new brokerage with two new sub-trusts (one for each of them as the trust is to divide at the time of my death). By the way, I assume the trusts would then be titled something like "John Doe Irrevocable Trust - Jane Doe sub trust" and "John Doe Irrevocable Trust - Sam Doe sub trust." Anyway, then just have the new brokerage pull the assets half and half to the two new sub trusts and not worry about whether the original brokerage would accept the paperwork. My implicit assumption is that a new brokerage would likely put up less of a hassle if they were getting new money and the successor trustees were the ones opening up the accounts at the new brokerage. Thoughts?
bsteiner
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Re: Successor Trustees

Post by bsteiner »

samsmith wrote:... The trust definitely has a mechanism to appoint successor trustees (Current trustee with consent of trust protector can appoint). ...
Why did the original testator or grantor require a trustee to get the consent of a protector to name his/her successor? If he/she trusted you enough to act as trustee, wouldn't he/she have trusted you trusted you enough to name your successor?
samsmith wrote:... The original lawyer also gave me a template form that I could use to appoint new successor trustees when trust formed about 15 years ago. I have now done this and named my kids as successor trustee. I have had the original successor trustee (parents resign as successor trustees) as they are now aging. So I have the forms done. But they are "just" pieces of paper with multiple signatures and wording explaining per specific articles in the trust that I was appointing successor trustees and the successor's signed as accepting. There was no place on the form to have them notarized. Does that matter? Actually, I have a different trust drafted by a different lawyer, but same issue regarding changing trustees and there was also no notary on similar type form - so maybe notary not needed if everyone signs? ...
The Will or trust agreement will say what you have to do to name a successor trustee. It could say you need the consent of a protector. It could say it has to be notarized. It could say you need 9 witnesses. Did you comply with whatever the Will or trust agreement requires?
Topic Author
samsmith
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Re: Successor Trustees

Post by samsmith »

LOL. I get your point. The original document said needed consent of trust protector. I complied with that - as trust protector signed. The original trust says nothing about the form naming a successor having to be notarized. So then I should be good. I complied with the terms of the trust as defined by the grantor. So I should be good and a brokerage or bank should accept the new successors when the time comes.
LarryAllen
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Re: Successor Trustees

Post by LarryAllen »

Maybe just do a clean restatement of trust. That way the trust keeps the same name/date but you have one fresh document which properly names everybody with the most current legal forms. Then there should be no anguish. Also, trust protectors are not often used and I have heard some speak negatively of the concept as unnecessary.
bsteiner
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Re: Successor Trustees

Post by bsteiner »

LarryAllen wrote:Maybe just do a clean restatement of trust. That way the trust keeps the same name/date but you have one fresh document which properly names everybody with the most current legal forms. ....
That only works if the trust is revocable. Most aren't.
LarryAllen wrote:... trust protectors are not often used and I have heard some speak negatively of the concept as unnecessary.
They're mainly used in offshore asset protection trusts. Clients are generally not comfortable giving a trustee in a tiny foreign country broad powers. The common workaround is to require that the trustee get the consent of a trusted person before being able to do much of anything. Now that many states allow asset protection trusts, most asset protection trusts are created in the U.S.

The other place they're used is when you would otherwise give a beneficiary the power to remove and replace the trustees, but the beneficiary has a disability and you don't want to give him/her that power, or there's some other reason you don't want to give him/her that power.. For example, our clients generally provide for their children in trust rather than outright to keep their inheritances out of their estates for estate tax purposes and to protect their inheritances against their creditors and spouses. Usually each child effectively controls his/her own trust, including (after reaching a specified age) having the right to become a trustee and the power to remove and replace his/her co-trustee (provided the replacement trustee is not a close relative or subordinate employee). However, sometimes it's not appropriate to give the child this power. In those cases, sometimes someone else has that power, or the child may have this power only with the consent of someone else. To avoid confusion, I prefer to just say that the other person has this power, or that the child can only do this with the consent of that person, without using the title "protector," but some people like that title.

In the case at hand, it's hard to see the purpose of it.
LarryAllen
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Re: Successor Trustees

Post by LarryAllen »

bsteiner wrote:
LarryAllen wrote:Maybe just do a clean restatement of trust. That way the trust keeps the same name/date but you have one fresh document which properly names everybody with the most current legal forms. ....
That only works if the trust is revocable. Most aren't.
LarryAllen wrote:... trust protectors are not often used and I have heard some speak negatively of the concept as unnecessary.
They're mainly used in offshore asset protection trusts. Clients are generally not comfortable giving a trustee in a tiny foreign country broad powers. The common workaround is to require that the trustee get the consent of a trusted person before being able to do much of anything. Now that many states allow asset protection trusts, most asset protection trusts are created in the U.S.

The other place they're used is when you would otherwise give a beneficiary the power to remove and replace the trustees, but the beneficiary has a disability and you don't want to give him/her that power, or there's some other reason you don't want to give him/her that power.. For example, our clients generally provide for their children in trust rather than outright to keep their inheritances out of their estates for estate tax purposes and to protect their inheritances against their creditors and spouses. Usually each child effectively controls his/her own trust, including (after reaching a specified age) having the right to become a trustee and the power to remove and replace his/her co-trustee (provided the replacement trustee is not a close relative or subordinate employee). However, sometimes it's not appropriate to give the child this power. In those cases, sometimes someone else has that power, or the child may have this power only with the consent of someone else. To avoid confusion, I prefer to just say that the other person has this power, or that the child can only do this with the consent of that person, without using the title "protector," but some people like that title.

In the case at hand, it's hard to see the purpose of it.

I probably read too fast. I thought it was a revocable trust and op was the grantor. I agree if that's not the case a restatement won't work. In that case I would do appointment of successor trustees and a new certified extract of trust. I would also make sure there are a couple of successors named and I like to put a corporate (or professional) fiduciary last to give a long lineage of trustees.

I agree about the use of the trust protector as you describe.

I also agree about use of continuing trusts for kids with kids becoming their own trustee at a certain age. Way too many attorneys skip this incredible asset protection tool and distribute the money outright at 25, 30, 35 or whatever simpleton language they have. Sad to lose the asset protection benefits when a continuing trust is really quite a simple thing.
Topic Author
samsmith
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Re: Successor Trustees

Post by samsmith »

Trust is irrevocable.
For example, our clients generally provide for their children in trust rather than outright to keep their inheritances out of their estates for estate tax purposes and to protect their inheritances against their creditors and spouses. Usually each child effectively controls his/her own trust, including (after reaching a specified age) having the right to become a trustee and the power to remove and replace his/her co-trustee (provided the replacement trustee is not a close relative or subordinate employee).
Yes. That is exactly how the trust is structured.
I was wrong in my OP. Trust Protector is the person who can appoint successor trustees
In that case I would do appointment of successor trustees and a new certified extract of trust. I would also make sure there are a couple of successors named and I like to put a corporate (or professional) fiduciary last to give a long lineage of trustees.
So since my parents have aged, the Trust protector has appointed multiple (as Larry suggested) successor Trustees and there already is a corporate Trustee as last resort. Not sure what you mean by a "new certified extract of trust" - that I don't have. So back to wondering will I need something like that - or is a document signed by Trust Protector appointing kids as successors and signed by kids accepting role of successor trustee sufficient? My sense is that it should be from what Bruce said - but this "new certified extract of trust" would make it even more likely that they would not have an issue?
bsteiner
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Re: Successor Trustees

Post by bsteiner »

samsmith wrote:... Not sure what you mean by a "new certified extract of trust" ...
Me neither. What's an "extract of trust?" Is it like extract of vanilla? Who certifies it?

Perhaps you might give the lawyer who handles your estate planning a copy of the Will or trust instrument and he/she can prepare the appropriate designations.
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