When a client is in the process of creating a trust, one of the first questions that comes up is “How should I choose my successor trustee?”. (Find out our answer in the previous article “How to Choose a Trustee” ). The follow-up question is usually if they should name co-Trustees to manage their revocable trust. Let’s explore the reasons why you, the creator, also known as the Settlor, of the trust, may or may not want to name co-trustees.
You may be thinking about naming co-trustees because:
- You may have only two children and don’t want to choose between them
- You may want to name a child as a Trustee and want to include a third party to work with them to ensure that the trust is managed properly
- You may feel that having two heads in charge are better than one
Duties of a Trustee
- Called upon to implement the framework set out in the trust document.
- Takes on responsibilities including regular accounting, managing investments, paying bills, and preparing tax returns.
- Communicates with the beneficiaries regarding the trust assets and distributions. In performing these duties, the trustee has a fiduciary duty to act in the best interests of both you and the beneficiaries for the lifetime of the trust.
Qualities of a Trustee
- Should be financially savvy, or be knowledgeable about resources available, to properly manage finances and investments.
- Trustworthy, demonstrate good judgment, and maintain confidentiality.
- Should be prepared to listen to the beneficiaries’ needs
- Able to make independent decisions regarding what is best for the trust as a whole and for each beneficiary.
- Should have the time and availability to dedicate to the role.
The Pros of Naming Co-Trustees
Some Settlors of trusts ask if they should name one successor trustee, or two or more Co-Trustees. There is no right answer to this question. Some people like the checks and balances that exist when you have two or more Successor Co-Trustees. Co-Trustees may bring different skill sets to the administration of the trust – one with more financial savvy while the other is able bring a better understanding of the trust settlor’s intent and of the beneficiaries’ needs and wants. The administration burdens of the trust may also be reduced for each trustee serving as they can share the workload. If you name two or more, it is critical that you describe whether they must always act together or whether they can act independently of each other.
The Disadvantages of Naming Co-Trustees
If the co-trustees must act together, this can mean that for dealing with paperwork, signing checks, and real property sales, the trustees must be in the same place at the same time. This can really slow the process down if the trustees do not live near one another, or if they do not communicate their availability to each other. Even though some trusts do include provisions that allow co-trustees to act independently of one another, some financial institutions will not honor the language (or they make it very difficult). This can cause a lot of headaches for the co-trustees.
More problems can arise when your co-trustees disagree about the trust administration process. Although your named co-trustees may have good relationships with each other now, stepping into the role of trustee due to a family crisis like a serious health problem or death can be emotional and stressful. When co-trustees try work together at an already heightened level of emotion, disagreements do happen. The trust usually dictates how the co-trustees need to proceed when they disagree. Sometimes that means that they must come to a unanimous decision, and if they cannot, then a court must decide. In other instances, when there are three co-trustees, trusts will often say that a majority controls. Again, this can lead to hurt feelings and family strife.
Choosing to name co-Trustees has both benefits and disadvantages. Talking to your elder law or estate planning attorney can help you make an informed decision.