Successor Trustees and Succession Planning

This past week, a client asked an interesting question. I reviewed this other law firm's revocable living trust agreement and unfortunately, there was no provision for a second successor trustee. A successor trustee is a trustee position that begins after the grantor or the creator of the trust is deceased. For example, John creates a living trust and appoints himself as trustee. John dies and now the trust agreement informs us who is the successor trustee after his death or incapacity.

In this trust agreement, there is a successor trustee, but she is not doing her job. The next question is how do we remove her and who is the second successor trustee? In the trust agreement, there is no provision for a second successor trustee or language addressing the process for selecting a trustee when no trustee is available or appointed.

Under 760 ILCS 5/13, the Trusts and Trustees Act addresses the issue of vacancy of a successor trustee. This is what the statute says " (760 ILCS 5/13)

Sec. 13. Vacancy ‑ Successor Trustee. In the event of the death, resignation, refusal or inability to act of any trustee:
(1) the remaining trustee, if any, shall continue to act, with all the rights, powers and duties, of all of the trustees; or
(2) if there is no remaining trustee, a successor trustee may be appointed by a majority in interest of the beneficiaries then entitled to receive the income from the trust estate or, if the interests of the income beneficiaries are indefinite, by a majority in number of the beneficiaries then eligible to have the benefit of the income of the trust estate, by an instrument in writing delivered to the successor, who shall become a successor trustee upon written acceptance of the appointment, but no beneficiary who is appointed as a successor trustee shall have any discretion to determine the propriety or amount of any distribution of income or principal to himself or to any person to whom he is legally obligated.

Thus, 760 ILCS 5/13(2) says that a successor trustee may be appointed by a majority in interest of the beneficiaries to receive the income from the trust estate or by a majority of the beneficiaries. In my client's case, there are three beneficiaries who have a right to the inheritance or the right to live in the residence of the trust. Unfortunately, one of the beneficiaries is deceased and the other beneficiary cannot be located. Thus, there is no majority of beneficiaries because my client has one vote and his living brother has one vote, which equals fifty percent. Typically, the term majority means greater than fifty (50) percent.

In my client's case, there are several options, but I thought this was an interesting issue.