The laws surrounding revocable living trusts are made somewhat confusing by overlapping terminology. The names grantor, trustmaker, trustor, settler and trustee all refer to the same person, the creator of the trust. This is because, unlike with an irrevocable trust, he maintains control of the assets he places into it. He can sell them, add others, or remove them for his personal use. As manager of the trust, he is the trustee, at least until his death.
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Role of the Successor Trustee
Although the creator of a trust is its trustee while he’s alive, someone must step in to manage the trust for him when he dies. This is his “successor trustee." When you create a revocable trust, you can name two or more individuals as successor co-trustees so the management of your trust depends on their agreement when you die. You can also name a descending order of individual successor trustees, so if one doesn’t want the job or is unable to perform, the next one can step in. Whoever you name, and however you name them, one or more will step into your role as trustee or manager of your trust when you die.
Change of Beneficiary
When you create a revocable trust, and while you are alive, you are its “initial beneficiary” as well as its trustee; you own the assets. When you die, this creates a change of beneficiary or beneficiaries. The person or persons you named in your trust documents to inherit from you become the new beneficiaries upon your death. They now own the assets you placed in your trust, according to the terms you decided when you made it.
Distribution of Assets
The assets in your trust pass to your beneficiaries much in the same way they would have if you had left a will instead. Your successor trustee acts as the executor of your will would. The only real difference is that the assets you placed in the trust do not have to go through probate. Your successor trustee will disburse your assets and pay your taxes, debts and the costs of the trust’s operation from the assets you placed into it. He will make your bequests and close out the trust. If you want any assets to remain in trust, such as if one or more of your beneficiaries are minors and you don’t want them to receive their money until they come of age, your successor trustee can create new trusts for them from your original one.
Death of the Successor Trustee
If you name only one successor trustee and that person predeceases you, or if he dies himself before closing your trust, it’s possible your trust could be left with no one to steer it. States have their own individual laws to address this situation when it occurs. Generally, your heirs would have to petition the court to have a successor trustee appointed. Your beneficiaries may have the right to suggest their own choice, or one of them can apply for the job himself.