Verena Meiser, Senior Associate,
If you’ve served as Trustee of a trust that benefits a family member or a friend, the time may come when you know you want to resign. You don’t need to have a particular reason to resign. Perhaps, the administration of the trust property is taking more time and energy than you have, or the beneficiary is simply difficult to deal with and wears you out. Perhaps, your health has deteriorated or you simply need a break. For whatever reason you decide to call it quits, there is a way to exit from your position in a responsible way.
Figuring out the mechanics of how to resign is probably the simplest of all the steps you will take. Examine the trust agreement closely to see if it provides instructions and guidance for your resignation. Look for notice requirements, either in the trust document or under State law. In Maryland, with the introduction of the Maryland Trust Act on January 1, 2015, there is a mandatory requirement to notify all Qualified Beneficiaries of an irrevocable trust. That group of beneficiaries includes all present and future beneficiaries of the trust or their representatives. Follow the notice requirements carefully and keep records of every notice you send out.
As soon as you depart from your duties as trustee, a successor needs to be in place to take over the trust administration. Examine the trust agreement carefully to get a good understanding of the provisions that either identify a successor or describe how a successor can be appointed. Does the document name a successor? Does the document give you, as serving trustee, the power to name a successor? Could you name a successor even if the document identified a successor, or does the identified successor need to be unavailable before you get to name a successor? If you did not name a successor, who could do so? Often, a majority of the trust beneficiaries or a court can appoint a successor trustee, if needed. Once you know who your intended successor is, contact that individual or corporate trustee. Find out if he, she, or the corporate trustee, is able and willing to serve. In addition, consider how the change of trustee will impact the beneficiary and the dynamics between the beneficiary and the new trustee. Try to envision how that relationship will play out and provide any support you can to smooth the transition. There is no legal obligation to do so, however, this is a way for you to contribute to the successful continuation of the trust.
If you have concerns about the successor trustee, you could appoint such individual or corporate trustee as your co-trustee, provided the trust agreement allows you to appoint a co-trustee. Serving alongside the co-trustee would give you the opportunity to observe them and, perhaps, to provide guidance regarding the beneficiary’s needs or the administration of a particularly tricky asset in the trust. Consider writing down such guidance for your successors to help pave the way towards a smooth transition and a successful future for the trust you’ve worked so hard to administer.
Importantly, prepare an accounting that reflects all trust activity during the time period that you served as trustee. Collect all records you kept for the trust, including tax returns, statements from financial institutions, contracts you signed as trustee, loans you made, and any other documentation relating to the trust and its administration. Make copies of the materials you pass on to the successor trustee. If you are entitled to compensation and wish to take it, determine the amount of compensation you are entitled to under State law. If you administered a trust in Maryland, the applicable section of the Maryland Trust Act is Section 14.5-708 of the Estates and Trusts Article.
For any questions you might have regarding your resignation as trustee, please call 443-393-7696 or complete the form below.