A contingent trustee, also referred to as a “successor trustee,” is a designated individual or entity named in a legal document such as a trust agreement, will, or estate planning instrument, to assume the role of trustee and manage specified assets or responsibilities only in the event that certain predefined circumstances or conditions arise.
The key to defining the events that trigger the appointment of a contingent trustee is to clearly specify the circumstances that would cause the primary trustee to step down. These events should be outlined in the trust document, will, or other estate planning instrument. The clarity and specificity of these events can significantly affect the effectiveness of the appointment of a contingent trustee. Such events often include:
While the specific requirements for a legally valid designation of a contingent trustee will vary by jurisdiction, standard requirements may include:
A transition protocol from primary to contingent trustees is a plan for transferring responsibility from the primary trustee to the contingent trustee. At the minimum, it should include a timeline for the transition that consists of a list of both administrative tasks (such as transferring files and passwords) and operational tasks (such as training the new trustee on how to do their job), a contact person for each task, and a communication plan specifying how the new trustee will be kept informed about the transition process.
The transition protocol should also provide that if the primary trustee is not incapacitated or deceased at the time of transition, the primary trustee should provide the contingent trustee with a list of all of the assets of the trust, including their current value, a list of all of the beneficiaries of the trust and contact information, and information about the trust's investment strategies.
Example: John, a widower with two children, sets up a living trust to benefit his kids and future grandchildren. His brother, Peter, has been named the primary trustee, managing investments and ensuring periodic disbursements. However, Peter suffers from a sudden health crisis and becomes incapacitated. Fortunately, John had chosen his long-time attorney, Susan, as a contingent trustee. As specified in the trust document, Susan takes over the operation of the trust, ensuring that it continues to function as intended, with no adverse impact on the beneficiaries.