What a Successor Trustee Does
When the original trustee of a California revocable living trust dies, the trust typically becomes irrevocable and a successor trustee steps in to administer it. The successor trustee does not inherit the assets. They manage them on behalf of the beneficiaries according to the instructions in the trust document.
Common duties include gathering and inventorying trust assets, paying outstanding debts and taxes, notifying beneficiaries and creditors, managing trust property during the administration period, and ultimately distributing assets to the named beneficiaries according to the trust terms.
In California, the successor trustee must also comply with California Probate Code Section 16061.7, which requires sending a specific notice to all beneficiaries and heirs within 60 days of assuming the role. This notice starts a 120-day period during which beneficiaries can contest the trust.
Why It Matters for Trust Loans
When a trust needs to borrow money secured by trust-owned real estate, the successor trustee is the person who applies for and signs the loan. They are not borrowing personally. They are acting in their fiduciary capacity on behalf of the trust.
Specialty lenders like North Coast Financial lend to the trust, with the successor trustee signing as the trust's representative. The lender will ask to review the trust document or a trust certification to confirm the trustee's authority to borrow and encumber trust property.
A successor trustee who needs to fund a beneficiary buyout, pay off a reverse mortgage, cover pre-sale renovations, or address other trust obligations can do so through a trust loan, often in 7 to 14 business days.
Related Terms
See also: Trust certification, Irrevocable trust, Revocable living trust, Fiduciary.
Frequently Asked Questions
Can a successor trustee be a beneficiary of the trust?
Yes. It is very common for a child to serve as both a successor trustee and a beneficiary of the same trust. This dual role requires the trustee to act impartially in the interests of all beneficiaries, not just themselves.
Does a successor trustee need to go through probate?
No. One of the primary reasons people create living trusts in California is to avoid probate. A successor trustee administers the trust privately, without court supervision, unless a problem arises that requires court intervention.
Can a successor trustee take out a loan against trust property?
Yes, provided the trust document grants that authority and the trustee acts in compliance with their fiduciary duties. Most California trust documents include a power to encumber, and California Probate Code Section 16225 provides additional statutory authority. See our full article: Can a Successor Trustee Take a Loan Against Trust Property?