What Happens When a Trustee Dies or Resigns?
Family Law
As a part of your estate planning in PA, you may decide to set up a revocable or irrevocable trust. To do so, you’ll need to name a trustee. The trustee will be responsible for managing the trust, reporting to beneficiaries, and fulfilling certain legal obligations.
The trustee’s job is so integral to the functioning of the trust that the court will appoint new trustees if the current one fails to live up to their obligations. However, as a grantor, you might naturally want to know: What happens when a trustee dies or resigns? Will your trust be impacted?
Luckily, Pennsylvania law provides guidance on how to handle these situations. With proper estate planning, you can prevent unnecessary confusion or conflict.
The Trustee’s Role: What Are a Trustee’s Duties?
A trustee is the individual or institution responsible for managing the trust’s assets for the benefit of the beneficiaries. Under 20 Pa.C.S. §§ 7701–7799.3, they must follow the terms of the trust document and fulfill their fiduciary duties.
As a trustee, the individual must exercise loyalty, prudence, and impartiality. If the trustee doesn’t fulfill their duties, it is a major legal concern. In serious cases, the court will step in to make sure the trust has an adequate trustee in place.
What Happens When a Trustee Dies in Pennsylvania?
If a trustee dies, they no longer have any authority over the trust. The trust doesn’t just disappear. Instead, another trustee must step in to continue the administration of the trust. How this process occurs depends on the terms of the trust.
In most well-drafted trusts, there are successor trustees named who can automatically take over if the original trustee dies or resigns. This type of setup ensures a seamless transition and helps your trust to avoid any court involvement.
Sometimes, the trust will designate multiple trustees. In this type of circumstance, the surviving co-trustees will continue managing the trust without any interruption unless there are specific requirements stated in the document.
If the trust does not designate a successor, the court may appoint one under 20 Pa.C.S. § 7764. In many cases, the beneficiaries or a Pennsylvania trust lawyer can petition the court to approve a suitable replacement. This isn’t ideal, but it may be the only option in some cases.
What Happens When a Trustee Resigns in Pennsylvania?
There are many reasons why a trustee might need to resign. They may be dealing with health issues that make managing a trust impossible. Alternatively, they may be struggling with personal issues or major time constraints. Under 20 Pa.C.S. § 7765, the state of Pennsylvania legally allows them to resign.
However, there are several important steps involved in order to resign from a trust. First, the trustee is allowed to resign if the terms of the trust say so. If the trust doesn’t explicitly allow for their resignation, then the trustee must receive the consent of the qualified beneficiaries or petition the court.
Ultimately, the goal is to make sure that the trust’s operations and governance are uninterrupted. Because of this, the resignation will not take effect until arrangements are made for a successor trustee to step in.
How To Appoint a Successor Trustee
When a trustee dies or resigns, the appointment of a successor depends on the trust document. If necessary, the court may also step in. The appointment of a successor trustee must proceed along one of the following three paths.
- Follow the Trust Terms: If the trust names successor trustees, those individuals will automatically step in.
- Consent of the Beneficiaries: In some cases, beneficiaries may agree to appoint a new trustee, subject to court approval.
- Appoint New Trustees: If no successor is named and the beneficiaries cannot agree, the court has the authority to appoint a new trustee.
Once one of these processes occurs, the new trustee can take over all of the old trustee’s responsibilities. For example, they will now be in charge of reporting to beneficiaries, managing the trust’s assets, and maintaining accurate records.
Don’t Forget To Take Care of Your Successor Planning
When you set up a trust, you need to make sure that you have a clear succession plan in place. If you don’t have a clear plan, the beneficiaries may face delays in receiving the assets. New family conflicts may develop as beneficiaries struggle to access the trust. If the court becomes more involved, it can impact everyone’s sense of privacy and the overall costs.
By naming one or more successors, you can ensure your trust’s operations are as smooth as possible. Even if you don’t have a different trustee in mind, you can always name a corporate trustee as a backup option.
Learn More About How To Set Up Your Trust
Whether you are creating a trust, serving as a trustee, or stepping in after a trustee’s death or resignation, professional guidance is essential. Our experienced Pennsylvania trust lawyers can help you draft trust documents, petition the court for the appointment of a successor, help with a trustee’s resignation, and protect the rights of your beneficiaries.
At the Clause Law Group, we’ve developed a reputation for providing exceptional legal support in Wayne, Lackawanna, Luzerne, Pike, and Monroe County. For more information about successor trustees and estate planning, fill out our online form today.
