What options are available to prevent a person who is nominated to serve as successor trustee from becoming trustee if he or she proves to be a bad choice? A lot can change between when the settlor signed their living trust and when the settlor is replaced as trustee at incapacity or death. The named successor trustee may then prove to have been a poor choice.
For example, the successor trustee may have proven himself to be untrustworthy but was not removed from the trust as successor trustee. If the settlor still has sufficient capacity, the settlor can amend the trust to appoint a different successor trustee upon realizing there is a problem waiting to happen. This highlights the importance of keeping one’s trust up to date with life’s circumstances.
A settlor with borderline capacity (understanding) to sign a trust amendment may benefit from Supported Decision Making to enhance their capacity. This involves the settlor appointing a trusted relative, friend or advisor to be their supporter and as such explain and advise the settlor on amending the trust, as relevant. The settlor’s capacity to sign a trust amendment is determined with the assistance of the supporter in place. The settlor then makes an informed decision.
Alternatively, the trust, when it was drafted, may include a “power holder” with authority to exercise the settlor’s power to appoint and remove trustees, including any persons already named by the settlor in the trust to serve as successor trustee. Of course, the same dilemma can arise with respect to whomever is appointed as power holder; there is no guarantee that the power holder will be suitable to their task either. However, the settlor does well to consider naming a trusted advisor (maybe a relative, friend or professional) in this capacity, especially if there is any question about the trustee.
A power holder is someone who does not want to serve a trustee (and be responsible for managing trust administration) but is qualified and willing to serve — as a safety valve — with the power of appointing an alternative successor trustee. Naturally, the settlor would nominate one or more back-up power holders, to avoid the possibility of not having a power holder if their first choice is unavailable when the time comes.
If all else fails, a court petition to remove and replace the successor trustee may be necessary to avoid bigger problems. Such a court petition may involve a temporary or permanent conservatorship as a necessary first step to petitioning the court to modify the trust provision regarding successor trustees. Alternatively, a trust beneficiary has standing to petition the court under section 17200 of the Probate Code to replace an unsuitable successor trustee. Court petitions, however, cost both time and money.
The foregoing is not legal advice. Consult a qualified estate planning attorney for guidance. Dennis A. Fordham, Attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.
