Imagine waking up in a hospital bed, unable to communicate or make decisions. When you cannot manage your own affairs, your family needs access to your assets to pay medical bills and manage your affairs. A trust is designed to continue functioning during incapacity, but only if you prepare it for these situations.
How does a trust continue operating during incapacity?
When you create a revocable living trust, you maintain control over your assets during your lifetime. However, incapacity changes this arrangement. You may no longer be able to make financial decisions or oversee the trust.
To avoid disruption, trusts may name a successor trustee. This does not mean that they gain ownership of the assets. Instead, the successor manages them according to the established plan. This person can step in to pay bills, manage assets and handle distributions to beneficiaries on your behalf.
How does a successor trustee take over management of a trust?
In Virginia, the transition of authority can often occur without court involvement. This can help avoid the need for a lengthy conservatorship proceeding, potentially saving time and money for your family. However, the transfer of control must follow the terms written in your trust.
Many trust documents describe incapacity using specific criteria. For example, the document may require written confirmation from one or more physicians. Virginia law allows you to set these standards within the trust. Once the stated condition is satisfied, the successor trustee assumes authority.
What happens if there is no successor trustee?
If there is no successor trustee, your trust may face delays during incapacity. No one has clear authority to manage the trust. As a result, financial matters can go unaddressed.
In such cases, a court may appoint a conservator to act on your behalf. However, court-appointed conservatorships involve lengthy proceedings and ongoing court supervision. Your family may also face legal fees and further delays in managing your affairs.
Protecting your family with proper planning
Incapacity can happen suddenly and without warning. An accident or serious illness can leave you unable to manage your affairs overnight. Your family should not face additional stress trying to access your accounts or pay your bills during a medical crisis. It may be beneficial to review your trust documents while you have the capacity to make changes.