Q: My brother and I are joint trustees in a living trust containing our mother's assets. What if one of us resigns?
The trust is located in Maryland and our mother is suffering from dementia.
If the trust is re-written with one of us as sole trustee, and the other as the successor trustee in the event the first becomes unable to serve as trustee:
1. Are the contents of the trust or trusteeship subject to inheritance according to the terms of the incapacitated/deceased trustee's will before control transfers to the successor trustee?
2. My brother and I are also joint attorneys-in-fact, with all decisions required to be jointly agreed. Does this have any impact on the trust or trusteeship if we move to a sole trustee arrangement?
3. Am I correct in the belief that our POA arrangement does not apply to funds that are contained in the trust and that a trustee may withdraw and use trust funds without consulting the other attorney-in-fact?
A: Specific questions about specific planning documents usually require sitting down with an attorney to review. That being said, I'll try to address in general terms the questions posted.
With respect to inheritance and other death taxes: these taxes apply in Maryland no matter whether something was inherited through a Will, under the laws of intestate succession, by survivorship rights or through a trust. Inheritance taxes in this state apply when the person receiving is not closely related. Death taxes (or "estate" taxes) apply when the total amount of everything given away exceeds a certain cap. (Currently in 2019, the thresholds are over $5 million for state death taxes and over $11 million for federal death taxes)
With respect to the relationship between joint attorneys-in-fact and joint or sole trustees: Typically these two things have no impact on each other. That is because the Trustee only controls what belongs to the Trust and the attorney-in-fact only controls what belongs to the person making the Power of Attorney. An asset is either in the Trust, in which case the POA wouldn't come into play, or it is outside of the Trust in which case the Trust wouldn't come into play. Sometimes these two types of fiduciaries work closely together but they are distinct roles legally speaking.
To sum, if a fiduciary (like a trustee or attorney-in-fact) has any questions about the legal documents they are working from, it is advisable to seek legal advice. While I hope the general information above helps, it doesn't offer legal advice or a promise to represent. You are encouraged to sit down with an attorney to review and understand any legal documents you have questions about.
A: Your questions are not general questions that can be answered in this forum. There is no way to answer your questions without reviewing your specific documents. Any attempt to answer would simply be guesses.
What I can tell you is that in general the trust document governs assets that are held in the name of the trust, and the power of attorney governs assets that are outside the trust, and there is little or no overlap, except that sometimes the documents (but usually both would have to say this) allow an attorney in fact under a power of attorney to make withdrawals from a trust, but that is uncommon. Do not expect that to be the case without having it verified by an attorney.
Also, rights to inherit assets in the trust are NOT governed by the settlor's will; they are governed by the terms of the trust. However, some trusts intentionally have "pour back" provisions that would cause inclusion of trust assets in the settlor's probate estate. So, that is just one reason why I say the only way to answer your questions is to review the documents.
It also sounds like you are conflating trustee status with beneficiary status. They are separate and distinct, although quite often there is overlap. You really should see a trust administration attorney for guidance.
A: Assuming your mother is the sole surviving grantor of the trust and has dementia and lacks mental capacity to make or consent to a change of the trust terms, the trustees' ability to make a re-write the trust, and the extent of such a re-write, will have to be determined after a careful review of the trust provisions, as well as the statutory and case law. Ordinarily, a revocable living trust can be changed if the trustees and all beneficiaries consent. There may be some limitations, however, which you will need to clarify in advance.
The trust should contain a provision regarding the resignation, removal, death or incompetence of a trustee, and whether and how a new trustee is appointed. That procedure should be followed, unless that is the provision you intend to amend or rewrite, assuming you can do that legally or pursuant to the trust terms.
Property transferred to a trust before the property owner dies is not subject to the person's will upon death. Rather, all property owned or titled in the trust's name will be governed by the terms of the trust and is not part of the deceased person's estate or subject to distribution under the will. Once property is transferred into the trust, the person no longer owns it in their name. Only property owned by the decedent personally at the time of their death is controlled by their will.
Similarly, once property is transferred to a trust, the trustees become the sole persons with authority to manage and dispose of assets held by the trust, pursuant to the trust terms. A POA only authorizes the attorney-in-fact to act with regard to the principal's property still held in their sole name (not in trust). A further distinction is that, upon death of the principal, the POA terminates and the attorney-in-fact may no longer act with regard to any property owned by the decedent at the time of their death; rather that authority passes to whomever is appointed as Personal Representative of the decedent's estate, as provided under the will (but only after the probate court grants letters of administration to that person once the estate is opened). The trustee's powers are not affected by the death of your mother, but are governed by the trust, which continues in existence and controls what the trustees can do with the trust assets.
It is not uncommon for a will to contain a general "pour over" provision, directing all assets not previously transferred into the trust to be distributed to the trust, and at that point, the trustees simply add those assets to the trust property and manage or distribute them pursuant to its terms.
You will need to meet with a lawyer to review the trust and your specific concerns. Because your mother is still living and you and your brother have POA over her, this is the time to review what is, or should be, transferred into the trust that has not already been transferred, and whether you should or can take other actions that are in her best interest, before it becomes too late to do so.