Should you have Co-trustees when preparing your Estate Planning

When clients select a successor trustee for their trust, they frequently choose one person to serve as a successor trustee at a time. Many attorneys continue to recommend that only a single trustee be appointed to avoid the potential for disagreements or conflicts between co-trustees during the trust administration after the trustmaker’s death or disability. This can be a prudent approach and works well in many situations. This is particularly true when the appointed trustee diligently keeps the trust beneficiaries informed about the trust administration and carefully fulfils the trustee’s responsibilities under both the law and the provisions of the trust document.

However, many clients are reluctant to place the entire responsibility for trust administration on one person. As a result, it is increasingly common for a trustmaker to nominate two or more family members or friends to serve as successor co-trustees. In some cases, it may even be beneficial to divide the trustee responsibilities between a professional trustee and a family member trustee. For example, a professional trustee might be given the responsibility for trust investments, accounting, and tax matters, and the family member trustee may be asked to handle certain distribution responsibilities, such as the timing and amounts of distributions to a minor beneficiary. While this co-trustee approach can have some drawbacks, it also has benefits that may be worth considering.

Advantages and Disadvantages of a Co-trustee Approach
Choosing multiple individuals to serve as co-trustees offers the following advantages:

  • Co-trustees can provide checks and balances to guard against potential abuses.
  • Sharing or separating the responsibilities of trust administration among co-trustees can expedite the efficient administration of a trust.
  • Depending on the terms of the trust, a particular co-trustee may be able to respond quickly to an emergency situation if none of the other co-trustees are available.
  • Beneficiaries may be more likely to accept the actions and decisions of unified co-trustees as opposed to the decisions of a single trustee.
  • Administrative responsibilities can be allocated among the co-trustees based on each co-trustee’s unique strengths and skills.

However, there are also disadvantages to consider:

  • Disagreements between co-trustees can lead to conflicts or stalemates.
  • Delays can result if the trust requires that all co-trustees be present and act together to conduct trust business.
  • Financial institutions, individuals, and businesses may be reluctant to take direction from fewer than all co-trustees, even if the trust document authorizes a single co-trustee to act.
  • Compensating multiple co-trustees for their time spent handling trust business can result in potentially higher costs.

What I Can Do to Help
As a professional advisor, we would discuss these advantages and disadvantages. I can educate you on the financial and tax consequences of certain decisions, such as liquidating different types of accounts and property held in the trust in preparation for distribution. Alternatively, if a trust is being divided into separate subtrusts for tax planning or asset protection planning purposes, the co-trustees may need education on the different options for long-term investing of the trust property to help them fulfill their fiduciary duty under the law to prudently administer the trust.
Counseling and educating co-trustees on these options may also help facilitate the resolution of conflicts that may arise between co-trustees during the trust administration.

Whether you have a single successor trustee or co-trustees, I can help you successfully navigate the many challenges and decisions that can arise during the trust administration. Contact us today so we can discuss additional strategies for working with successor trustees.