Who Controls a Living Trust?
Q&A
Q: If something happens to me, who has control of my trust?
Answer: If you or you and your spouse die or become incapacitated, your successor trustee, normally one of your children, becomes the new trustee and is empowered to act on your behalf and to follow your wishes as set forth in your living trust. All of this is done quickly and privately according to the instructions in your living trust and without court interference.
Q: Who are the parties to a living trust?
Answer: The parties to a trust are, the settlor(s), who is(are) the person(s) who creates the trust, the trustee(s), who is(are) the person(s) who manages the trust, and the beneficiaries, who benefit from the trust income and assets. In living trusts prepared by us, the settlor(s), the trustee(s) and initial beneficiaries are always the same unless you specifically request otherwise.
Q: Who can be my successor trustee and how are they selected?
Answer: It is your choice. You choose your successor trustees as one of the provisions of your living trust. Commonly, our clients choose a family member such as a spouse or child. Normally there is a first, second or even third successor trustee in the event one of your successor trustees would be unable or unwilling to serve. You may also have two or more people serve as joint trustees. You can change your successor trustees at any time. You can also name a third party as a successor trustee such as a trusted friend, a professional (e.g., CPA), or a corporate trustee (e.g. bank).
Q. What are the rights of the surviving spouse as trustee?
Answer: The surviving spouse retains full rights to all of the trust assets and continues to have the ability to amend or revoke the trust. The only exception is if an AB trust (i.e. Credit Shelter Bypass Trust) has been created for tax savings at the first death. This AB trust is normally only created for those couples with estates of over the Federal Exemption Equivalent Amount which is currently $3,500,000 (2009). Further information about the AB trust is found below.
Q. How is the successor trustee forced to abide by the wishes of the creators of the living trust?
Answer: A successor trustee has a fiduciary obligation to follow the instructions provided in the living trust. The beneficiaries named in the trust have the right to take the trustee to court if the trustee fails to abide by those instructions.
Q. Can my successor trustee make changes to my living trust?
Answer: No. Once the individual(s) who created the trust (i.e., Settlors) have died or become incapacitated, no changes are permitted in the trust.
Q. If I create my own trust, does a bank or trust company have to be involved?
Answer: Absolutely not. Most people who create their own trusts choose to be their own trustee while they are healthy and select a child as a successor trustee in the event that they become incapacitated or die. However, if you create your own trust you can also name a bank or trust company to be trustee of your trust and to manage your financial affairs in accordance with the provisions of your trust. Normally banks charge a fee for this service as a percentage of the assets in your trust. If you have created your own trust and do elect to have a special corporate trustee, you, or your successor trustee can also remove or select a new special corporate trustee should you or your successor trustee feel that the special corporate trustee is not acting in your best interests. Be cautious where parties such as banks or trust companies offer to assist you in setting up your trust since they will normally insert the bank or trust company as a present or future trustee in such a way that you or your children cannot change.