Successor Trustee in Alabama: What to Do First
If you have been named successor trustee of a loved one's trust in Alabama, your first job is to learn exactly what the trust says and protect its property, before anything is sold or given out. Property the trust owns, or that is payable to it, generally avoids probate, but trust administration still takes work. Here is the order of the first weeks.
1. Read the trust and every amendment
Find the original trust agreement and every amendment or restatement, and read them together: a later amendment changes the earlier terms, and a restatement replaces them. Read for:
who serves as successor trustee, and how the trust says to accept the role
who the beneficiaries are, and when and how each one receives a share
whether the trust continues for a young beneficiary or one who needs protection
what the trust says about the trustee's powers and pay
If there is more than one successor trustee, find out how the trust requires the co-trustees to make decisions.
2. Decide whether to accept, and confirm that you can act
Being named does not make you trustee until you accept, and acting as trustee can itself count as accepting. Check how the trust says to accept, and decide before you take charge. If an asset needs protecting right away, a lawyer can tell you what you may do before you decide.
Banks and brokerage firms will want proof of your authority. Usually that is a certification of trust, a short document that confirms the trust exists and that you are the trustee without handing over the whole trust, though some also ask for parts of the trust. You will also need certified copies of the death certificate.
3. Secure the assets and keep them separate
Make a list of what the trust owns: accounts, real estate, a business interest, valuables. After the death, a trust that was revocable generally needs a new tax identification number; confirm the details with the CPA, especially for a joint trust. Set up a trust account, or update the existing one, and keep trust money out of your personal accounts from the first day. Mixing trust money with your own can expose you to personal liability.
4. Find what is not in the trust
A trust controls only the property it owns. A house or account left in the deceased person's own name may still need probate, usually under a pour-over will that sends it into the trust. Retirement accounts and life insurance pass by beneficiary designation, which may or may not name the trust. Sorting this out early prevents a missed asset from holding up the whole administration. When assets outside the trust need probate, we represent executors named in a will alongside the trust work.
5. Notify the beneficiaries
Alabama law requires a trustee to keep the beneficiaries reasonably informed, and the trust may set its own notice terms. Unless the trust says otherwise, within 60 days after you accept the job you must tell the qualified beneficiaries that you have accepted, with your name, address and phone number. Within 60 days after you learn that a revocable trust has become irrevocable, usually at the death, you must also tell them the trust exists, who created it, and that they may ask for a copy of the trust and for your reports. A clear, prompt notice also heads off much of the friction that slows an administration down.
6. Plan for debts, expenses and taxes before distributions
Property of a trust that was revocable until the death can be reached for the deceased person's debts, funeral expenses, estate administration costs and the family allowances Alabama law provides, when the probate estate is not enough to cover them. Before distributing, work out which claims are valid, the order they are paid in, the tax returns that are due and what to hold in reserve. Coordinate the final income tax returns and any trust returns with the CPA. A trustee who distributes without providing for these can be personally responsible for the loss.
7. Keep records and report
Keep a record of every dollar in and out. Unless the trust says otherwise, an Alabama trustee sends a report at least once a year, and when the trust ends, to the beneficiaries who receive or may receive distributions, and to any other beneficiary who asks. A beneficiary may waive the report, but you still need to answer reasonable requests for information promptly. Good records also make it easier to show you treated each beneficiary fairly.
8. Distribute as the trust directs, at the right time
Distribute exactly as the trust directs, keeping a reasonable reserve for debts, expenses and taxes still to come. Some shares stay in trust for years, for example for a young beneficiary, rather than being paid out at once. Get a signed receipt for each distribution, and talk with your lawyer before asking anyone to sign a release. Close the trust's accounts and file the final returns only when the trust is ready to end.
Mistakes that create personal liability
distributing before debts and taxes are provided for
mixing trust money with personal accounts
favoring one beneficiary, including yourself, in a way the trust does not allow
selling property for less than it is worth, or to a family member, without proper authority
going silent with the beneficiaries
Do I need to go to court?
Usually not. Most Alabama trusts are administered without court supervision. Court involvement is the exception, such as when the trust's terms are unclear or assets outside the trust need probate.
When to call a lawyer
Early, ideally before you accept the role or the first asset is sold. Ty Shepard advises successor trustees through trust administration in Huntsville and North Alabama. You remain the trustee and make the trustee's decisions; we give you the legal advice and handle the legal work. We do not serve as trustee or take on trust contests or beneficiary lawsuits as new matters.
If you are choosing a trustee for your own trust instead, see who can be a trustee in Alabama, and talk with Sarah S. Shepard about your plan.