Trust Becomes Irrevocable
Your trust is revocable only when you, as the grantor, are capable of managing it and overseeing the assets you placed into it. It becomes irrevocable when you die. Typically, the individual you named as your successor trustee has no leeway to do things his way when he takes over – he must follow the directions you laid out in your trust documents. He only has flexibility if you specifically granted it to him when you laid out the terms of your trust.
The successor trustee's first responsibility when you die is to let your trust beneficiaries know that this has occurred and he is now in charge. He should also let them know that they have a right to see the trust documents. He will have to notify your creditors, and he should make contact with your bank, investment institutions and other entities holding your assets, providing them with a copy of your death certificate, if necessary.
Identifying and Managing Assets
Ideally, your trust's formation documents include a detailed list and description of the property with which you've funded it. This will make your successor trustee's job much easier, because he must locate all assets or their corresponding paperwork, such as deeds for real estate or insurance policies. Your successor trustee has a fiduciary responsibility to handle the trust's assets wisely until the trust closes, and this can be a fine line. He can't manage them too conservatively, because this might cheat your beneficiaries out of the full value of their inheritances. For example, if you left $10,000 in a shoe box, he would be wise to move the money to a savings or investment account so it can earn interest. He cannot make risky investments, however, so he shouldn't sink the $10,000 into an exploratory oil rig off the coast of a third world country. If anyone owed you money when you died, your successor trustee must collect and deposit it. He might have to have certain assets appraised, such as real estate or artwork, to ensure a fair distribution among your beneficiaries when the trust closes.
Paying Debts, Taxes and Expenses
Trusts avoid probate, but they don't avoid payment of your debts, so your trustee must take care of these as well. Tax returns must be prepared and filed, both for you and for your trust, because ideally it's been earning money from its investments. When the trust closes – or annually, if it remains up and running – your trustee must typically submit a report to your beneficiaries, showing all payments he has made and what they were for.
Your trust documents determine what becomes of your trust after your death. You have two options – you can instruct that your successor trustee distribute all the trust's principal assets to its beneficiaries immediately, or you can direct that he move the principal assets into other trusts when you die. These subsequent trusts can meet your long-term estate planning needs, such as if you want your beneficiaries to inherit incrementally, not in windfalls. In either case, your initial trust closes after its assets are distributed elsewhere. You can name your successor trustee to continue managing these other trusts, or you can appoint someone else to take over, such as your bank's trust department.