What Happens to a Revocable Trust When the Trustee Dies?

By Cindy DeRuyter, J.D.

What Happens to a Revocable Trust When the Trustee Dies?

By Cindy DeRuyter, J.D.

A revocable trust is a popular estate planning tool that, when structured and funded appropriately, allows assets to pass outside of probate court to one or more named beneficiaries when the trust's creator (called the grantor or settlor) passes away. In most cases, the grantor is also the initial trustee, or the manager of the trust. When the grantor passes away, the successor trustee administers the trust according to the trust agreement's terms.

Paper labeled "revocable trust" lying under a fountain pen

Trust Administration After Grantor's Death

If a trust was a joint revocable trust created by a couple as part of their estate plan, the death of one grantor trustee generally does not require any specific action on the part of the surviving grantor trustee.

For an individual revocable trust, the death of the grantor is generally a triggering event. After it occurs, the successor trustee, usually appointed in the trust agreement, administers and distributes the assets as specified in the governing document.

Responsibilities of the Successor Trustee

The successor trustee must follow the terms of the trust agreement. When the grantor passes, the successor trustee must:

  • Obtain tax identification numbers. When the grantor of a revocable trust dies, the trust becomes irrevocable. At that point, the successor trustee needs a federal tax identification number or employer identification number. In some states, successor trustees also need state tax identification numbers.
  • Identify, collect, safeguard, and value trust assets. Before distributing assets, the successor trustee needs a clear picture of what assets the trust holds. The trustee inventories assets, arranging for appraisals when necessary.
  • Pay valid debts and expenses. Most revocable trust agreements state that trust assets are available to pay the grantor's final expenses and other valid debts. The successor trustee should make reasonable efforts to identify creditors and debts.
  • Pay income and estate taxes. If there are income or estate taxes due after the grantor's passing, the trustee files and pays taxes as provided in the trust agreement. If there is a federal or state estate tax obligation, the successor trustee should seek help from legal, financial, and accounting professionals to ensure she calculates and apportions taxes per the trust agreement's terms.
  • Distribute remaining trust assets. Finally, the successor trustee manages and distributes the remaining assets to the trust's beneficiaries. In some cases, revocable trusts provide for long-term management of a beneficiary's share. This is common for minor beneficiaries or financially irresponsible beneficiaries. Successor trustees should follow the grantor's wishes as specified in the agreement, seeking professional guidance when necessary.

Death of a Successor Trustee

When a successor trustee passes away during trust administration, look to the trust document. In many cases, revocable trust agreements identify more than one level of successor trustees. So, the agreement appoints another successor trustee to serve if the previously named one dies, resigns, or is otherwise unable to serve. If the agreement does not appoint any others, it may specify who has authority to nominate a successor. Barring that, state law determines who serves and how that person or institution is appointed.

If you want to create a revocable trust as part of your estate plan, you can hire an estate planning attorney licensed in your state. Alternatively, work with an online service provider to draft your revocable trust agreement.

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