A Guide to Virginia Trusteeship

Becoming a Virginia trustee is an important legal responsibility. This guide will help you understand the basics of trusteeship.

Virginia Trusteeship

Being responsible for a Virginia trusteeship is an important legal obligation. You have multiple requirements and responsibilities to fulfill in order to serve as a trustee.

Luckily, the Virginia Code offers explanations and guidance in the Virginia trusteeship process.

Assuming Trusteeship

Virginia Trusteeship

Accepting Trusteeship

You ultimately accept your appointment as a trustee when you assume responsibility of the trust property. Your acceptance grants you the ability to exercise the powers and duties of the trusteeship.

The responsibilities of your Virginia trusteeship are outlined by the Virginia Code. However, your duties will vary in accordance with the terms of your inherited trust.

Accepting your trusteeship assumes you are willingly complying to the terms of the trust.

Declining Trusteeship

You can decline your Virginia trusteeship in several ways.

Your inability to openly accept your trusteeship will result in your assumed decline of your position as trustee. You may also decline openly to the court at the time of your appointment.

Unaccepted Trusteeship

Your decline of trusteeship does not exclude you from your duties as a trustee. You retain your ability to:

  1. Act in order to protect the property of the trust, so long as you file your resignation in a reasonable amount of time following trust actions
  2. Pass your trusteeship along to a qualified beneficiary
  3. Inspect the trust property to ensure it does not potentially violate existing laws, or to assess the property’s liability as an asset of the trust

Surety of Trusteeship

Under Virginia law, there is a surety required upon acceptance of trusteeship. Surety – or a trustee’s bond – is financial insurance that you provide to the court. This insurance serves as your motivation to fulfill the requirements of your position as trustee.

Typically, you are only required to post surety to protect the interests of the beneficiaries. Surety is paid in an amount equal to the total value of the estate you are entrusted with, which is often a heavy financial burden.

The court decides whether or not you are required to post surety based on the assets of the estate. However, if the beneficiaries or the trust grantor (in the trust documents) waives your responsibility to post surety, you are exempt. Additionally, passing your trusteeship on to a bank or other financial institution exempts the trustee from paying a bond.

Co-Trusteeship

Your trusteeship is either singular or partnered in Virginia estate planning. As the sole trustee, you have the discretionary ability to make decisions regarding trust assets. As a co-trustee, you have limited executive abilities.

Making a decision as a co-trustee requires the unanimous agreement of all co-trustees. Additional disagreement requires a majority agreement of the co-trustee population in order to act.

Vacancy of a co-trustee for any reason is assumed by your remaining co-trustees. If necessary, the court appoints a successor trustee as your replacement.

As a co-trustee, you are able to make independent decisions. However, your decision must be agreed to by the majority before you act. If you disagree with the decision of a co-trustee, but the majority agrees to it, you are not liable for the outcome of that decision.

Also, if you dissent from a decision before it is acted upon, you avoid liability for that outcome.

However, as co-trustee, you are responsible for additional responsibilities. You are expected to prevent one of your co-trustees from breaching the trust, and you are expected to dissuade your co-trustees from committing a breach of the trust.

Vacancy in Trusteeship

As stated, a vacancy is either assumed by one of your co-trustees, or the court may appoint your successor.

A valid vacancy in trusteeship occurs if:

  • You reject your trusteeship
  • The named trustee cannot be identified, does not exist, or is predeceased
  • You resign as trustee
  • You’re disqualified or removed from the trusteeship by your co-trustees, beneficiaries, or the court
  • You die during your trusteeship
  • Incapacity prevents you from serving during your trusteeship

Typically, a vacancy is not filled when there are one or more remaining trustees.

However, when a vacancy is filled, it is filled in order of:

  1. The alternate trustee, who is named in the trust documents to replace you as trustee
  2. An appointed successor, who is approved by all of the trust beneficiaries
  3. A trustee appointed by the court

Additionally, if you are the trustee of a charitable trust, you are replaced in order of:

  1. The alternate trustee
  2. A qualified individual selected by the charitable organization
  3. A trustee appointed by the court

Any successors retain the same rights, responsibilities, and power of trusteeship.

Resignation

Voluntary

As trustee, you are able to resign from your position under the following terms:

  1. You must provide notice to the trust grantor (if alive), to your co-trustees (if applicable), and the beneficiaries of the trust
  2. Your resignation must be approved by the court managing your trusteeship

Liabilities of your position, the liabilities of your surety, and the liabilities of your omissions during your trusteeship are not changed or affected by your resignation. In other words, the activity that took place during your time as trustee remain unchanged by your decision to resign.

Removal

Your removal from trusteeship also carries its own terms. These terms must be adhered to in order to issue your removal from trusteeship:

  1. Your grantor, co-trustees, and beneficiaries must petition the court for your removal
  2. The court must hear the case, and issue a decision on your position as trustee

Reasons for being removed from your trusteeship include:

  • Breaching the terms of the trust document
  • Lack of cooperation among co-trustees, causing the impairment of the trust’s administration
  • Being unfit, unwilling, or failing to administer the trust effectively in the overall interest of the beneficiaries
  • Arising changes to the circumstances of the trusteeship

While your removal is petitioned by your trust acquaintances, your removal is only final following court decision.

Delivering Property

As the former trustee, you are required to deliver the trust property to the newly appointed trustee. You are responsible for the trust property until it is delivered. Therefore, you are expected to perform the duties and responsibilities of protecting the trust property, even if you have resigned or have been removed from your position.

As the resigned or removed trustee, you have the ability of expedited transfer of trust property to the newly appointed trustee. To do this, all trust property titles must be “vested” – or assigned – to your successor upon their acceptance of the trusteeship.

Compensation

As the trustee, you are compensated for your time and efforts protecting trust assets. You are legally entitled to “reasonable compensation” that is based on the circumstances of the trust. If your compensation is not accounted for by the trust documents, it will be assigned by the court.

Conversely, the court retains the right to grant compensation that is more or less than entitled if:

  1. Your actual duties are not equal to the duties covered by the trust documents
  2. The compensation established by the trust documents is unreasonably high or low, depending on the duties of your trusteeship

Reimbursement

As a trustee, you will likely accrue expenses that pertain to the protection and benefit of the trust and its beneficiaries.

You are entitled to be reimbursed by the trust for expenses. Appropriate expenses include:

  • Expenses that are a result of the trust’s administration
  • The preventative measures taken by the trustee to prevent “unjust enrichment” of the trust; in other words, preventing trustee benefit at the expense of the trust
  • Trustee advance of funds to protect the trust assets; a lien is placed on the trust property until you are reimbursed in full, with interest as appropriate.

Conclusion

Serving in a Virginia trusteeship is a legal, personal, and financial obligation. Acting as a trustee is a major responsibility, and you must thoroughly consider your position before accepting.

To assess your position as an estate trustee, schedule a consultation with our estate planning attorney.

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