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What is a Contingent Trustee? 

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.

Defining the Transitioning Events  

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:

  • Incapacity: If the primary trustee becomes mentally or physically incapacitated and cannot fulfill their obligations, the contingent trustee steps in to ensure the uninterrupted management of trust assets.
  • Death: When a primary trustee passes away, the contingent trustee assumes the trustee's role to continue the trust administration according to the grantor's intentions.
  • Resignation or Removal: Should the primary trustee willingly resign or be removed from their position, the contingent trustee is ready to take up the mantle and maintain the proper administration of the trust.
  • Unavailability: If the primary trustee becomes unavailable due to extended travel, illness, or other reasons, the contingent trustee can temporarily manage trust affairs.
  • Institutional Changes: Even in the case of institutional trustees, unforeseen circumstances such as bankruptcy, merger, or significant internal restructuring can create uncertainties in their ability to fulfill their trustee responsibilities. Designating a contingent trustee accounts for these possibilities.

Formalities of Appointing a Contingent Trustee:

While the specific requirements for a legally valid designation of a contingent trustee will vary by jurisdiction, standard requirements may include: 

  • The appointment should be incorporated into the trust document.
  • Written consent should be obtained from the prospective contingent trustee, confirming their willingness to serve in that capacity.
  • Depending on jurisdiction, the appointment may need to be witnessed, and the witnesses might need to meet certain criteria (e.g., be over a certain age and not be beneficiaries of the trust).
  • Some jurisdictions may require the section of the trust document appointing the contingent trustee to be notarized.

Establishing Transition Protocols 

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.

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