At some unknown time, a Trustee of a Living Trustee may suffer an illness or injury which makes the trustee unable to manage the trust estate (which includes all assets titled in the name of the trust) or unwilling to serve as trustee.
To this extent, it is critical for an interested party (i.e., beneficiaries, trustor or Co-Trustee) to the trust, to identify the basis for the Trustee's inability to serve. Generally, forgetfulness or being overly trustworthy with unknown persons, may be the early signs of incapacity. Particularly with trustees who are elderly, the early onset of Alzheimers, Parkinsons, a mild stroke or Demetia can be the reason. So too, an internal injury resulting from a fall can be the genesis of mental impairment.
Administering the Trust
Since a Trust is an independent legal entity, the actions that must take place when a Trustee becomes incapacited are generally drafted into the document as express terms. To this end, it is necessary that the Trust instrument is reviewed first with a qualified Trust and Estates attorney to identify: (1) The requirements that must exist for a successor trustee to become the new fiduciary of the estate, including whether the Trustee can simply execute a resignation of their authority and designation of a new trustee; and (2) the types of legally sufficient medical evaluations that will usually be required. But, as a word of caution, utilizing the same attorney who drafted the trust may create a potential conflict of interest depending upon the facts of the particular case. Thoughtful consideration should be given to obtaining a separate attorney who would assist in the administration or at least give an independent opinion on the issue of conflict.
Obtain Qualified Medical Opinion(s) in Writing
If a family member has been given the authority under a HIPAA (Health Insurance Portability and Accountability Act) Authorization to obtain the trustee's private medical information, it may be necessary to discuss with the trustee the requirement of having a neurological or psychological evaluation for the trustee. In some cases, there may be resistance to this action which can be understood as the trustee could have been independent for many years. Either way, if the trust instrument calls for the evaluations, then it will be necessary for these actions to take place, sometimes through court intervention.
In many cases, a trust will require (similar to a Sprining Durable Health Care Power of Attorney) that the evaluation or report of two physicians or psychologists be ottained in order to determine that the trustee is in fact unable to continue serving in her capacity.
Elder Abuse and Financial Exploitation
Unfortunately, there will be times where there could be a financial exploiter who is attempting to obtain information, resources and control of trust assets by making accusations of a Trustee being incapacitated. In these cases, it may be prudent to petition the court (with notice to all interested parties) having jurisdiction over the trust to determine the current status of the trustee and whether the Successor Trustee or a newly designated trustee should be appointed. By taking this type of action, an exploiter will either be forced to appear in court or will retreat in their attempts to obtain the Trustee's assets.
If confronted with exploitation from an unrelated or related person, and there is sufficient evidence to establish that a crime may have been commited (including Theft, Elder Abuse , forgery, etc.) serious consideration should be given to detailing all facts in writing, and reporting the alleged crime to law enforcement after consulting with an attorney.
Trust Administration Documentation
At the point when an attorney or court determines that a Trustee is unable or unwilling to continue serving, it will be necessary for the Successor Trustee to accept their new role as fiduciary. In Arizona, the trust and the Arizona Trust Code will describe the fiduciary obligations. And, new documents such as a Certification of Trust/Affidavit of Incumbency will need to be drafted and executed. Notice to beneficiaries of a change in trustee will be required. Finally, the Successor Trustee will need to notify all financial institutions who control or manage trust property of the change in office of Trustee and account for all financial actions. These actions should not be taken without the assistance of a competent Trust and Estates attorney.