Q. I have a Living Trust. I am the original trustee and my children are the successor trustees. Do you have any thoughts about easing the transition of trustee duties from me to my children when the management of my finances has become too much for me?
A. Yes. It is important for that transition to be as seamless as possible, so that your assets can be managed and bills paid without delay. Here are some suggestions:
1) Simplify Succession “Trigger”: Take a look at your trust to determine what triggers the change of trustees from you to your children. Typically, it may be the written determination by one, or perhaps two, physicians, reciting your inability to handle your financial affairs. If your trust requires a letter from two physicians, I suggest changing that requirement to only one. Reason: If you are then residing in a nursing home, where patient care is typically monitored by one physician, it may be difficult to arrange an evaluation for this purpose by a second physician. Reducing the requirement to only one doctor may save your children much grief with medical logistics.
(2) HIPAA Release. Make sure that your trust, or related document, provides a HIPAA privacy release authorizing your doctor to disclose information about your ability to manage your affairs. Absent a privacy release, some physicians may be reluctant to write a letter regarding your capacity.
(3) Add Co-Trustee. At some point, consider adding one of your children as a co-trustee and recite in your trust, or in an amendment to your trust, that any single trustee has the power to write checks or take other action on behalf of the trust. This would then authorize your child to gradually take over more responsibility for managing trust assets without a formal certification of your incapacity. Doing so sooner than later also allows you the opportunity to watch your child perform his or her duty, and afford you the opportunity to provide pointers to him based upon your years of accumulated wisdom.
(4) Consider Resignation. Alternatively, when you feel that managing your trust has become too much for you, you might consider the proactive approach of resigning. A formal resignation triggers the succession of trustee duties to your child without a formal finding of incapacity. It, too, can accomplish a smooth transition without the need for doctors’ letters.
(5) Minimize Successor Liability. To encourage a successor trustee to step into the shoes of the predecessor, recite in your trust that the successor is not responsible for any acts or omissions of his predecessor. You might also recite that whoever is serving as trustee is not liable for any action taken in good faith. These two protective clauses would help induce your designated nominee to assume his duties when appropriate, whether that successor is one of your children or the trust department of your favorite bank.
(6) Inform Your Bank: Make sure that your financial custodians have your list of successors on file, so that when they step forward to assume their duties their identity is known to the bank. You might even introduce your nominees to your bank officers, and suggest that they take a sample signature and make note of the child’s address and driver’s license.
By taking some or all of the above steps, you will have taken proactive steps toward a seamless transition of trustees when the time comes.