Trustee's Legal Companion, The: A Step-by-Step Guide to Administering a Living Trust

By Liza Hanks and Carol Elias Zolla

Serving as the trustee of a living trust after someone has died can be a big task. This book shows trustees how to get organized, get moving, and do a good job.

Living trusts are popular estate planning tools, but when you’re chosen to serve as a trustee, you might wonder where to begin. Trustee’s Legal Companion has everything you need to get organized, get started, and get the job done.

You’ll learn how to:

• decide whether to take on the job of trustee
• set up ongoing trusts for surviving spouses, children, or beneficiaries with special needs
• invest trust assets
• get help from lawyers, financial planners, and other experts
• handle taxes and prepare accountings, and
• work effectively with beneficiaries and distribute trust property.

The authors—attorneys who have helped many a bewildered trustee—show you, step by step, how to administer a living trust with confidence.

• Language: English
• Publisher: NOLO
• Release date: Mar 3, 2023
• ISBN: 9781413330625

Liza Hanks

Liza Hanks is a Palo Alto, California attorney who specializes in estate planning for families of all ages. A graduate of Stanford Law School, she has also served as an instructor at the Santa Clara University Law School and practiced with the state of California and a prestigious Silicon Valley firm. Hanks is the author or coauthor of The Mom's Guide to Wills and Estate Planning. She also blogs on wills, trusts, powers of attorney, living wills, estate taxes, and probate court on the law blog Everyday Estate Planning.

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7th Edition

The Trustee’s

Legal Companion

Attorneys Liza Hanks and

Carol Elias Zolla

Logo: NOLO

SEVENTH EDITION

MARCH 2023

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Names: Hanks, Liza Weiman, 1961- author. | Elias Zolla, Carol, 1971- author.

Title: The trustee’s legal companion / Attorneys Liza Hanks and Carol Elias Zolla.

Description: 7th edition. | [El Segundo, CA] : Nolo, 2023. | Includes index.

Identifiers: LCCN 2022035582 | ISBN 9781413330618 (paperback) | ISBN 9781413330625 (ebook)

Subjects: LCSH: Living trusts--United States--Popular works. | Executors and administrators--United States--Popular works.

Classification: LCC KF734 .H36 2023 | DDC 346.7305/2--dc23/eng/20230103

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Please note

Accurate, plain-English legal information can help you solve many of your own legal problems. But this text is not a substitute for personalized advice from a knowledgeable lawyer. If you want the help of a trained professional—and we’ll always point out situations in which we think that’s a good idea—consult an attorney licensed to practice in your state.

Dedications

To my wonderful family: Howie, Aaron, and Abby.

—Carol Elias Zolla

To Marjorie Baer, in loving memory, for creating a generous and loving legacy with her living trust, and to her brother, Philip Baer, for being a fabulous trustee and making his sister’s last wishes come true. Together they taught me everything I’ll ever need to know about the power of estate planning and trust administration.

—Liza Hanks

Acknowledgments

I would like to thank Barbara A. Beck and John F. Hopkins, amazing mentors who taught me nearly everything I know about trust administration and estate planning; the members of TEXCOM and EPLAC, who make estate planning fun; my mother, Emilie H. Elias, who personifies the ethical and responsible practice of law; and my father, Charles A. Elias, who reminds me that it’s possible to be a lawyer and still maintain a healthy work-life balance.

—Carol Elias Zolla

I would like to thank the following people:

My family, Steven, Kate, and Sam, for putting up with yet another writing project.

All of my Nolo editors, for always making the book better.

My partners at GCA Law Partners LLP, for being great colleagues; my paralegal, Susie Granata, for everything; and my estate planning friends and mentors: Tish Loeb, Carol Elias Zolla, Michael Carney, Julie Lanz, Barbara Wright, and all of the members of the Bay Area Estate Planning study group, for keeping me honest, answering my endless questions, and inspiring me, always.

—Liza Hanks

And, finally, we both would like to give our most heartfelt thanks to Mary Randolph, whose persistent advocacy for our readers made this book much better than it ever would have been without her.

About the Authors

Liza Hanks is a partner at GCA Law Partners LLP in Mountain View, California, where she practices estate planning, trust administration, and probate law. She is a certified specialist in Estate Planning, Trust and Probate Law by the State Bar of California Board of Legal Specialization and taught estate planning and taxation at Santa Clara University Law School as an adjunct lecturer. She is a graduate of Stanford Law School, the host of the podcast Life/Death/Law, a former magazine editor, and the mother of two children (neither of whom has any interest in becoming an attorney). She’s also the author of Every Californian’s Guide to Estate Planning (also published by Nolo).

Carol Elias Zolla is an attorney who practices only in the field of estate planning and administration. She is certified as a specialist in Estate Planning, Trust and Probate Law by the State Bar of California Board of Legal Specialization. Carol has an AV Preeminent rating from Martindale-Hubbell and has been named a Northern California Super Lawyer since 2012. Carol graduated from the University of California at Berkeley and the UCLA School of Law. Carol and her family live in Los Gatos, California.

Table of Contents

The Trustee’s Companion

1Should You Serve as Trustee?

Getting the Big Picture

Trustees and Executors: What’s the Difference?

What Kind of Trust Do You Have?

Is There a Cotrustee?

Is the Settlor Incapacitated?

Are the Records a Mess?

Can You Get Along With the Beneficiaries?

Other Issues You May Be Concerned About

If You Decide to Say No

2Thinking Like a Trustee

Fiduciary Duty: It’s All About the Beneficiaries

Get Help When You Need It

3Working With Beneficiaries

Communicate Well and Often

Should You Share the Trust Document With Beneficiaries?

What Beneficiaries Need to Know

What Unhappy Beneficiaries Can Do

Heading Off Trouble

If You Are Also a Beneficiary

If You Are Administering an Ongoing Trust

4The First Few Months

Get Death Certificates

Find and File the Will

Notify the Social Security Administration

Notify the State Department of Health

Identify the Beneficiaries

Notify Beneficiaries and Heirs

Inventory Trust Assets

Protect Trust Property

Get a Taxpayer ID Number for the Trust

Get Property in Your Name as Trustee

Review Trust Investments

Establish a Record-Keeping System

Get Assets Appraised

Pay Debts and Creditors’ Claims

5Assets That Should Be in the Trust—But Aren’t

Trust Assets Not Listed in the Trust Document

What Goes Into the Trust and What Stays Out

What Does the Will Say?

Getting Property Into the Trust

6Life Insurance, Retirement Plans, and Other Assets Outside the Trust

Life Insurance

Pension Plans

Traditional IRAs and 401(k) Plans

Roth Plans

Survivorship Property

Payable-on-Death Property

7Getting Help When You Need It

Real Estate Maintenance

Organizing Personal Property

Legal Advice

Appraisals

Taxes

Investing

Trust Accountings

8Managing Ongoing Trusts

Kinds of Ongoing Trusts

Trusts for Surviving Spouses

Trusts for Children

Special Needs Trusts

Who Gets Trust Money and When?

9Investing Trust Assets

The Duty to Invest Prudently

Permissible Investments

Getting Help From Investment Experts

The Beneficiaries’ Needs

Balancing the Needs of Current and Future Beneficiaries

Handling Real Estate

What to Do With Business Assets

10Dealing With Taxes

There’s Always a Taxpayer

Careful: You Could Be Personally Liable

Tax Returns You May Have to File

Beneficiaries and Taxes

Missing Returns

The Final Personal Income Tax Return: Form 1040

The Trust’s Income Tax Return: Form 1041

The Federal Estate Tax Return

State Estate Tax

Other Taxes You Need to Be Aware Of

11Trust Accountings

How Often Must You Prepare Accountings?

Who Should Prepare Accountings?

A Typical Simple Trust Accounting

Who Gets a Copy?

Delivering the Accounting to Beneficiaries

12Terminating the Trust

When Does the Trust End?

How to Distribute Trust Assets

Filing the Final Fiduciary Income Tax Return

Keeping Some Trust Money in Reserve

Receipts From Beneficiaries

Should You Ask Beneficiaries to Sign Releases?

Final Correspondence With the Beneficiaries

Telling the IRS You’re No Longer Trustee

Glossary

Appendixes

AState Information

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

BSample Trust

Index

The Trustee’s Companion

Someone who trusted you very much gave you the job of administering a living trust. That’s no small thing. It’s your job to carry out that person’s last wishes, pay their remaining debts and taxes, and distribute their property to their favored relatives and friends.

In the old days, only wealthy families created trusts. Those were the folks with the family attorney who knew everyone’s names and could be counted on to give advice at every turn. These days, all sorts of people create trusts, many of whom don’t have the luxury of a family lawyer and who don’t know the first thing about what will happen when the trust actually has to be wrapped up someday. As a result, every single day people just like you find themselves stuck with a job that they don’t know much about, aren’t sure that they can handle, and yet, for many reasons, feel honor bound to take on. That’s why we wrote this book.

We don’t blame you if right now you are wondering how on earth to get this done properly, efficiently, and with a minimum of drama. Consider this book your trusty companion (pun absolutely intended). It’s full of practical advice that will help you handle it smoothly, whether you are administering a trust that’s going to get settled quickly or one that lasts for years. We’ll show you how to:

decide whether or not to take on the job of trustee

understand your legal duties

develop good relationships with the trust beneficiaries

get organized

identify and collect trust assets

deal with life insurance, retirement assets, and other nontrust assets

find and work effectively with expert advisers

set up ongoing trusts for the benefit of the surviving spouse, children, or someone with a disability

invest trust assets properly

handle income tax returns for the deceased person and for the trust (and get help with estate tax returns)

prepare proper trust accounting reports, and

end the trust and distribute assets to the beneficiaries.

As estate planning attorneys with more than 40 years of collective experience, we’ve counseled trustees on all aspects of trust administration, from beginning to end. We’ve seen what works well, what can go wrong, and how to avoid some of the most dangerous mistakes. We’ve taken our best advice, our most illustrative war stories, and our best practices and put them here for you.

You can read this book from beginning to end, or just skip to the specific chapters that you need help with. You can use this book as a do-it-yourself guide so you can do much of the work without hiring help. You can also use it as a way to work effectively with attorneys, accountants, and financial advisers. However you choose to use it, we hope it will help you along the way.

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When there are important changes to the information in this book, we’ll post updates online, on a page dedicated to this book:

www.nolo.com/back-of-book/TRUG.html

CHAPTER

1

Should You Serve as Trustee?

Getting the Big Picture

Trustees and Executors: What’s the Difference?

What Kind of Trust Do You Have?

Simple Living Trusts

Ongoing Trusts

Is There a Cotrustee?

Is the Settlor Incapacitated?

Getting a Doctor’s Statement

Managing the Settlor’s Trust Assets

Are the Records a Mess?

Can You Get Along With the Beneficiaries?

Other Issues You May Be Concerned About

Your Responsibility for Paying Trust Debts

What Happens If You Mess Up

Getting Paid for Your Work as Trustee

Getting Expert Help

If You Decide to Say No

It’s an honor to be chosen as a successor trustee of a loved one’s trust. The person who chose you considered you trustworthy and responsible—someone who pays attention to detail and gets along with others. But do you want the job? You don’t have to take on the responsibility of serving as trustee—you can decline.

Most of our clients agree to act as successor trustee because they feel a sense of loyalty to the person who asked them. In many cases, the trustee is a beneficiary of the trust, the deceased person’s accountant or other adviser, or a close friend or relative.

Sometimes, however, the best thing you can do for all involved is to politely decline. If you are overwhelmed by demands on your time and energy or don’t get along with one or more of the beneficiaries, you might not in fact be the best person for this added responsibility. No one will be happy if you take on the job but are unable to give it the time and attention it requires. Accept the position only if you have the time, the patience, the organizational skills, and the sense of humor required to juggle a thousand administrative details and a few anxious beneficiaries at the same time.

EXAMPLE: Karen names her friend Marjorie as the successor trustee of her living trust. Marjorie is close to both Karen and Karen’s brothers, Pete and Randy. She is married, lives nearby, and works as an accountant.

When Karen dies 15 years later, Marjorie is no longer on speaking terms with either Pete or Randy, is raising three children as a single mother, and has moved across the country. When Marjorie is notified that she’s been named as successor trustee, she doesn’t accept the job. Although she loved Karen dearly, she knows that it would be difficult for her to act as successor trustee because of her limited free time, the distance, and her strained relationship with Karen’s brothers.

What about accepting the position with the idea that you can quit later if serving as trustee gets to be too much work and hassle? We don’t recommend it. If you are worried that the responsibility is going to require too much of your time or put you in an uncomfortable position with respect to your relatives, our advice is not to accept in the first place. It’s true that you can always resign later on, but when you act as trustee for any period of time, you expose yourself to some personal liability that you might rather avoid altogether. Also, before you can resign, you’ll have to take a number of steps to protect yourself and the beneficiaries. That all can be avoided if you decline the job now.

Think twice about taking the job if any of the following are true.

You don’t get along with the beneficiaries. If you don’t like the people you’re managing the trust for, you probably won’t have an easy time doing it.

You don’t know what the settlor owned and think it will be hard to find out. If you don’t have the time for massive detective work, perhaps this just isn’t the right job for you at this time.

Lawsuits are threatened or already in progress. As trustee, you’ll have a duty to defend the trust against a lawsuit that could reduce its value. You will also have to collect money owed to the trust. Trust money can be used to pay for the legal expenses, but this may take up a lot of your time and energy.

You’re named along with a cotrustee. Having a cotrustee complicates everything, because generally all cotrustees must sign off on everything. And chances are that one of you will end up doing all the work.

Getting the Big Picture

Before you decide whether or not to serve as a successor trustee, you really need to understand what a trust is and why someone would create one in the first place.

On the legal side, a trust is an agreement in which one person, the settlor, agrees to transfer property to another, the trustee, who will manage that property for the benefit of someone else, the beneficiary. For the whole plan to work, the settlor must legally transfer ownership of the assets to the trustee of the trust. A deed transfers a house; other documents are used to transfer brokerage and bank accounts. These documents notify the county, the bank, or the brokerage firm that the settlor used to own the asset and is now transferring it to the care of the trustee. The trust, in the person of the trustee, becomes the new legal owner, and the trustee becomes the new manager.

With a living trust, usually, the settlor is the first trustee and also the beneficiary. So, the settlor (the person who puts the property into the trust) continues to use and manage that property during their lifetime. There’s a flurry of paperwork, but nothing actually changes in real life with respect to how the settlor can use or invest the assets. When the settlor dies (or becomes unable to manage the trust assets), the next trustee steps up to manage and distribute the assets. That’s you, if you accept the job.

When you are the trustee, you are responsible for the trust’s assets. Your job is to manage those assets and distribute them as the trust document directs. Your actual duties will vary enormously depending on what kind of trust you are in charge of and what the trust document instructs you to do. But no matter what kind of trust you’ve got on your hands, you’ll have certain common challenges and issues.

In general, your job is to:

identify and protect the trust’s assets

figure out what the trust instrument (the document that created the trust) requires you to do

be scrupulously honest

communicate regularly with the trust beneficiaries

manage the assets long term or distribute them to the beneficiaries right away, and

end the trust when it’s time (as determined by the trust instrument).

The chief benefit of the trust is that it allows the assets to be distributed to the people who inherit them without the need for a probate court proceeding, saving the beneficiaries time and money. If the trust is designed to stay in existence for a while, it can also provide a way to manage assets for young beneficiaries or provide tax savings.

Environmental Problems: A Really BIG Red Flag

If the trust includes real estate that has possible environmental liability, such as a gas station, an urban lot bordered by old factories, or even farmland that was treated with pesticides, you need to get an environmental risk assessment from a qualified expert right away. If the problems are big, think very carefully about accepting the job.

You might have to accept the trusteeship in a limited scope just to hire and supervise a general inspector. But you are well within your rights to demand that the trust foot the bill for an inspection before you agree to take on the job of trustee. If the inspection turns up problems and you decline to serve as trustee, you must tell any prospective successor trustees what you know and let them determine for themselves whether to accept the position.

Do not transfer title to the property to your name until you have an idea of whether cleanup will be required; once you’re in the public record as owner, you can be personally on the hook.

If you do accept the trusteeship, you can authorize an in-depth inspection that will show the scope of the damage and the work needed to prepare the property for sale or transfer. The trust may be required, under local, state, or federal law, to clean up any environmental problems before the beneficiaries receive their share of trust assets. Environmental cleanup can be time consuming, complicated, and costly—and beneficiaries might disagree with you on the proper way to proceed. But if you knew of, and failed to, prevent the environmental damage, you could become personally liable for the cost of cleanup.

Trustees and Executors: What’s the Difference?

Even when you’re dealing with a trust, there’s almost always a will, too. That’s a good thing, because wills do two things that trusts can’t: They nominate guardians to raise minor children in case there are no surviving parents, and they distribute property that was owned by the settlor but was not placed in the trust.

As trustee, you are legally responsible only for assets that are held in the trust. Most often, these are the assets that the settlor transferred to the trust by recording a new deed or by filling out forms at a bank or brokerage house. But life is messy, and people often leave some things out of their trusts. These overlooked assets can range from small everyday checking accounts to large brokerage accounts, stock, or even real estate. The job of collecting, protecting, and distributing nontrust assets falls instead to the executor (also called personal representative) of the person who has died.

It’s common for the same person to be named as trustee and executor. If the deceased person’s will nominates you to act as the executor, you are the person in charge of assets governed by the will. An executor steps into the shoes of the settlor and finishes up all the odds and ends that get left behind after a death. Among other things, the executor goes through the settlor’s mail, cancels credit cards and utility bills as necessary, notifies creditors, and files the settlor’s last tax returns.

If the will gives someone else the executor’s job, you’ll need to work together and communicate closely to get debts paid, tax returns filed, and assets distributed. You’ll probably always be in the loop anyway. It’s common practice for most attorneys to draft living trusts along with a special kind of will, called a pour-over will. The pour-over will directs the executor to transfer any property owned by the settlor at death into the living trust. The goal is to prevent having two separate sets of instructions about who should get what. If all the property is poured into the trust, only one set of instructions (those in the trust instrument) needs to be followed. This is a sensible way to arrange things, and it means that you, as trustee, will ultimately be in charge of everything the settlor owned.

Before assets outside of the trust are transferred into the trust, there might have to be a probate proceeding. It depends upon what assets are outside of the trust and what the laws of your state say. In many states, small assets, such as checking accounts, can be transferred into the trust without a formal probate proceeding. (Chapter 5 helps you figure this out.) Whether it’s the executor’s or trustee’s responsibility to transfer the assets to the trust will depend on the value of the asset and state law. Until the transfer process is complete, the trust assets cannot be completely distributed.

EXAMPLE 1: Ethan was the successor trustee of his father’s living trust. After his father died, Ethan discovered that his father had left a brokerage account worth $20,000 outside of his trust. Because it wasn’t held in the trust, Ethan had no authority over it as the successor trustee. But under the terms of his father’s pour-over will, the trust inherited the brokerage account. As a result, Ethan could claim it on behalf of the trust. (He didn’t have to go to probate court, because the account’s value was low enough to qualify for a simple, out-of-court transfer process under state law.) Once the account was in the trust, Ethan divided it into equal thirds and distributed it to his siblings, as the trust document directed.

EXAMPLE 2: Felix was the successor trustee of his mother’s living trust and nominated as her executor in her pour-over will. After his mother died, Felix discovered that her recently purchased vacation home, worth $200,000, was not held in her trust. So Felix had to initiate a probate court proceeding to request that the judge appoint him as executor, follow his state’s probate procedures, and wait for the court’s approval to distribute the property.

After about a year, the judge ordered the property to be distributed to Felix in his position as successor trustee of his mother’s trust. Only then could Felix distribute the vacation home to the trust beneficiaries, as the trust document directed.

What Kind of Trust Do You Have?

You don’t know what you’re getting yourself into until you figure out what kind of trust you’ve got on your hands. Some trusts are relatively simple to administer, and your job would be wrapped up quickly. Others might take time and effort for years to come.

How can you tell whether you’ve got an easy trust or a hard one? Look at the trust instrument—specifically, the section that states what is to happen when the person who created the trust (called the settlor, grantor, or trustor) dies. If the trust was made by a couple, find where it says what will happen when the second settlor dies. Usually you’ll see a section heading that says something like Trust Distribution Upon the Death of Surviving Settlor.

If the trust says that the trust assets are to be handed over (distributed) to certain people outright, you’ve got a simple trust to administer. If, however, the trust says that certain assets are to be held in trust for beneficiaries, you’ve got a more complicated trust, one that could last a while.

If you’ve been named trustee of an ongoing trust, it may make sense to ask an attorney or a CPA to review the trust instrument. An expert might be able to identify potential issues that would make your job as trustee especially difficult. For example, a trust that owns commercial real estate would require a lot of your time to manage, or a trust with complicated distribution requirements would require you to balance the needs of several beneficiaries over a long period of time.

Simple Living Trusts

A simple living trust is designed to end soon after the settlor’s death, so there will be no ongoing trust for you to manage. You will collect all the trust assets, pay the debts, expenses, and taxes of the trust, and distribute what’s left to the beneficiaries. Because trust assets don’t need to go through probate, you can wrap everything up and give property to the beneficiaries without the time and delay of a court proceeding. In six months or so, you should be done.

EXAMPLE: Joshua established a living trust to hold his assets and named his close friend, Adam, to serve as the successor trustee. The trust instrument directed Adam, at Joshua’s death, to distribute half of the trust assets to Joshua’s sister, Mary, and half to his cousin, Leopold.

When Joshua died, Adam collected the trust’s assets and paid the debts, expenses, and taxes due. Then he distributed half of the trust’s remaining assets to Mary and half to Leopold. When he’d done that, the trust administration was finished.

This kind of basic, probate-avoidance living trust is a substitute for a will. Traditionally, people used wills to direct what should happen to their property after death. Most of us know from movies, books, and plays that a person’s last will and testament is the document that gets read in front of the family, by the lawyer, after a death. (That’s the part where Junior finds out that he’s been disinherited and his sister discovers that she’s the new owner of the manor house.) A will is still a perfectly legal way to get the job done, though sadly nobody does a big dramatic will reading anymore.

Wills are legal and effective, but they have a big drawback: Property left through a will generally has to go through probate court after a person dies. Probate is a court process that was designed to make sure that a person’s wishes were followed. There’s nothing inherently evil or wrong about probate. In some situations, it’s useful to have a judge make sure that a will is valid, identify the property owned by the deceased person, ensure valid bills are paid, and make sure that the property is distributed as directed by the will. The problem with probate is simply that, for many families, court supervision of this process isn’t necessary—and, in many states, the process can take more than a year and cost thousands of dollars.

That’s why living trusts are very popular, especially in states where probate is time consuming and expensive. Living trusts allow a person to transfer assets to loved ones without the time and expense of a probate court proceeding.

EXAMPLE: Rebecca establishes a living trust during her lifetime. The trust instrument makes her the settlor and also names her as trustee. It names her grown daughter Erin as the successor trustee.

Rebecca transfers the title to her house, her brokerage account, and her savings account to herself as the trustee of her living trust. Now, the name on her deed and accounts is Rebecca Durham, Trustee of the Rebecca Durham Revocable Living Trust. During her lifetime, she manages and uses trust assets however she wants.

When Rebecca dies, her daughter takes over as the successor trustee. The trust instrument directs Erin to distribute the trust assets in three equal shares to herself and her two siblings. After notifying certain people (as required by state law) and paying all of Rebecca’s last expenses, debts, and taxes, Erin distributes the trust assets in equal thirds. No probate court proceeding is required.

Ongoing Trusts

Although probate avoidance (as discussed above) is the main benefit of a simple living trust, settlors can get additional benefits if they set up a more complicated trust designed to last for years or even decades.

For example, couples in second marriages can control assets left to the surviving spouse or ensure that children from prior marriages will inherit. The very wealthy can do sophisticated tax planning.

There are many reasons one might set up an ongoing trust. For example, a couple might create an ongoing trust directing that, if one of them dies, the assets are to be placed in trust for the benefit of the surviving spouse. Or an ongoing trust might direct that certain assets are to be held in trust for young children until they grow up or for other family members indefinitely.

If you are trustee of an ongoing trust of this kind, you’ll be in charge of filing tax returns, investing trust assets, and choosing how to spend trust funds for beneficiaries. You will likely work with an accountant and an attorney. You could wear your trustee’s hat for a lengthy period of time.

EXAMPLE: Martina and Steven established a living trust. Upon the death of the first spouse, the trustee was directed to hold trust assets in two trusts, both for the benefit of the surviving spouse. One trust was to hold the assets owned by the first spouse to die (up to the federal estate tax exemption); the other was to hold the assets owned by the surviving spouse.

Martina and Steven named Steven’s younger brother, Trevor, to serve as successor trustee after both of them had either died or resigned as trustees. After Martina died, Steven was in ill health and overwhelmed by grief. Steven asked Trevor to take over management of the trust and resigned. Trevor reviewed the trust and realized that he would be managing Steven’s two trusts for the rest of Steven’s life. After consulting an attorney and a CPA, he decided that he could do the job and accepted the position of successor trustee.

Is There a Cotrustee?

Remember having to do a group project in high school? Every group seemed to include one slacker who made big promises but never followed through, one member who brought the pizza, and one responsible person who pulled an all-nighter to actually finish the project. If you serve with someone else as a cotrustee, you could find yourself recalling those school projects.

The settlor probably named you and another person as cotrustees in hopes that your skills would complement each other’s and that together you would make a perfect trustee. Or maybe the settlor just