Imagine the following scenario: A man creates a trust with a do-it-yourself form he found on the internet. He names himself trustee and names his wife and children as beneficiaries of the trust. He walks into his local bank, hands the bank manager the trust agreement, and the bank happily creates a trust account for him. The man puts his life savings into the trust account, thinks “that was easy!” and dies the next day.
Unfortunately, the deceased man’s wife and children have a problem. The DIY trust agreement does not name a successor trustee and provides no mechanism for the beneficiaries to appoint a successor trustee. Unfazed, the widow (with the same DIY spirit as her late husband) navigates the probate process on her own and successfully gets herself appointed as personal representative (administrator/executor) of the decedent’s estate. She then walks into the bank with all of the documents she thinks will help her take control of the trust account – the death certificate, the letters testamentary or letters of administration, and a notarized “certificate of trust” in which she names herself as successor trustee – and is shocked when the bank refuses to transfer the account (or the funds therein) to her.
First, the bank explains that since the funds of the account were held in trust, they are non-probate assets and so they are not part of the decedent’s estate. The bank therefore deems the widow’s status as personal representative of the estate to be irrelevant.
Second, the bank looks at the trust agreement and sees no mechanism for the widow to appoint herself as trustee, so it ignores the “certificate of trust.”
Finally, the bank explains that the lack of a trustee does not terminate the trust, citing O.C.G.A. § 53-12-201(b): “A trust shall never fail for want of a trustee.” Therefore, the bank refuses to liquidate the trust account and disburse the funds to the beneficiaries or to the estate.
The bank refuses to budge and so the trust funds are stuck. At this point, the widow hires a lawyer – me – because as you may have guessed, the scenario above is based on a true story.
So how can a successor trustee be appointed? The solution is found in O.C.G.A. § 53-12-201(d) and (e):
(d) The qualified beneficiaries may appoint a trustee by unanimous consent.
(e) In all other cases, the court, on petition of an interested person, may appoint any number of trustees consistent with the intention of the settlor and the interests of the beneficiaries.
In practice, a lawyer might be able to convince the bank (or other financial institution) to transfer the trust account to the trustee appointed by the named beneficiaries by providing signed affidavits evidencing the beneficiaries’ unanimous consent. It is also possible, however, that the bank – which wants to minimize its own liability – decides that the safest thing thing to do is demand a court order.
If so, the lawyer will need to petition the court to name a successor trustee in accordance with O.C.G.A. § 53-12-201. In Georgia, Superior Courts have jurisdiction over the appointment of trustees and declaratory judgments, and going through Superior Court can be time-consuming. Fortunately, in larger counties (including most of the counties in the Atlanta area), Probate Courts – which generally move quicker than Superior Courts – have expanded jurisdiction which enables them to appoint trustees and issue declaratory judgments involving fiduciaries under O.C.G.A. § 15-9-127.