Your individual trustee has died or retired: what next?

If your trustee has died or retired, what next? The short answer is that the trust survives, but it has no one entitled to sign, instruct a bank or make a distribution until a successor is in place. This page is written for the settlor, the protector or a beneficiary who has just learned that an individual trustee, often a trusted friend or adviser, can no longer act.

The first move is not to look for a new name. It is to read the trust deed and find out who holds the power to appoint, because a trustee chosen by the wrong person can be challenged later.

What has actually changed

An individual trustee holds the trust assets in their own capacity, on the terms of the deed. When that person dies, becomes unable to act or steps down, three practical things happen at once:

• the legal title to the assets sits in limbo, or still stands in the former trustee's name or that of a nominee;
• bank, custodian and registry signatories are out of date;
• decisions that need a trustee, such as distributions, loans or sales, are paused.

A well-drafted deed anticipates this. Many deeds name a successor trustee, give the protector a power of appointment, or allow the settlor to appoint while living. Others say very little, which is where a family can lose months. The glossary entry on the successor trustee explains the usual wording.

Which law governs the trust matters here, since it decides how a vacancy is filled. Under the Hague Convention on the Law Applicable to Trusts and on their Recognition, the trust is governed by the law the settlor chose, expressly or by implication (Article 6). If that law does not know the trust, the choice has no effect and the law with the closest connection applies instead, looking at the place of administration, the location of the assets, the trustee's residence and the purposes of the trust (Article 7). Switzerland signed the Convention on 3 April 2007, ratified it on 26 April 2007, and it entered into force for Switzerland on 1 July 2007. What this means for your own deed depends on its wording and on where you and the beneficiaries live, so it calls for an individual analysis.

The first ninety days at a glance

The labels are a sequence, not a timetable. How quickly each step can be taken depends on the deed, the banks and the number of people who must agree.

Immediate steps

Within the first days, concentrate on keeping the structure still while you work out who may act.

1. Gather the documents. The trust deed and every amendment, any deed of retirement and appointment, the latest accounts, trustee minutes and the letter of wishes. The checklist on documents to gather before changing trustee lists what a successor will ask for.
2. Tell the protector, if there is one. In many trusts the protector holds the power to remove or appoint trustees. See working with a protector for how those powers are usually framed.
3. Do not distribute, sell or reinvest on your own initiative. Nobody currently has authority, and an action taken by a non-trustee can create liability for the person who took it.
4. Locate the assets. List accounts, custodians, companies and property held for the trust, with the name in which each is registered.
5. Avoid improvised arrangements. A relative signing "on behalf of" the late trustee is not a substitute for a valid appointment.

Who may appoint the new trustee

The entry point is always the appointment clause. It usually points to one of the following, and the order of precedence in the deed counts.

If the deed is silent, or the person who holds the power cannot act, the route may run through the court or statutory rules of the governing law. That is the situation in which a specialist review is most useful, because the wrong route can be slow and expensive for the family.

Keeping the banks calm

Banks react to uncertainty, not to the death or retirement itself. A calm, documented approach keeps accounts open.

• Write once, early. A short letter explaining that the trustee can no longer act, that a successor is being appointed and that no instructions will be given meanwhile is better than silence.
• Ask what they need. Each institution has its own onboarding rules for a new trustee, usually including identification, the deed of appointment, the relevant extracts from the trust deed and a statement on beneficial ownership. See your trustee and the trust bank accounts.
• Expect a freeze on signatories. Most banks suspend dealings once they hear of a death. This is protective, not hostile, and it is lifted once the new trustee is accepted.
• Keep one point of contact. One person should speak to each bank, so the story stays consistent.

A new trustee will also be asked about the identity of the settlor, the beneficiaries and the controlling persons. A professional trustee with a regulated compliance function can usually answer these questions in a form that banks recognise.

Choosing the successor

A vacancy is the best moment to ask whether another individual is the right answer. An elderly friend can carry the role for years, but the same risk returns when they next fall ill. The comparison between an individual or corporate trustee is a real decision, not a formality, and the decision method for choosing a trustee in Switzerland sets out criteria you can score.

On the Swiss side, Article 18 of the LEFin provides that a trustee with its seat or domicile in Switzerland must be a sole proprietorship, a commercial company or a cooperative, entered in the commercial register. The approval question is covered in FINMA and SO-FIT; you should know what status any candidate holds before you sign.

If the choice is between keeping the trust where it is with a new individual or moving it to a regulated Geneva trustee, the page on switching trustee or staying and fixing the relationship frames the trade-offs, and changing trustee step by step covers the mechanics.

An example

Example: a family established in Lausanne set up a discretionary trust some years ago and named an elderly family friend as sole trustee. The friend retires after a long illness. The deed gives the protector, a cousin of the settlor, a power to appoint, but the cousin has never exercised it and the banks have not been told anything.

The family first assembles the deed and the accounts, then the protector writes a single letter to each bank. Instead of naming another friend, the protector and the settlor prepare a short list of criteria: regulatory status, continuity if one person is unavailable, and willingness to hold a file of minutes. They compare two candidates, sign a deed of retirement and appointment, and the banks update signatories. The family then asks the new trustee to review the trust and refresh the letter of wishes. The detail will differ in every case, as it turns on the deed and the governing law.

Points to check before you sign

• Who holds the power to appoint, and is it exercisable now?
• Is the outgoing trustee's retirement, or the death, documented?
• Do the banks and custodians have a written notice?
• Has the successor been checked for status, conflicts and continuity?
• Are the title and the signatories being transferred, not just the instructions?
• Has the letter of wishes been reread and, if needed, updated?

The trustee due diligence questionnaire helps with the third and fourth points. If the loss of the trustee came with a disagreement in the family, see a dispute between beneficiaries and the trustee. A confidential assessment can help you establish who holds the power, what the banks will require and whether to move the trust, and any fees depend on the structure and are indicated after that assessment.