Estate planning often involves the strategic inclusion of a trust agreement. If you decide to include a trust in your comprehensive estate plan, you will need to appoint a Trustee to administer the trust. You have the option to appoint more than one Trustee (Co-Trustees) but is that a wise choice. While it is always advisable to consult directly with your estate planning attorney when making important decisions such as this, the Essex Junction attorneys at Unsworth LaPlante, PLLC discuss the advantages and drawbacks of appointing Co-Trustees.
Understanding Trust Basics
At its core, a trust constitutes a legal arrangement created by a Settlor, entrusting a designated Trustee with the responsibility of managing and safeguarding assets for the benefit of one or more beneficiaries. All trusts are classified as a testamentary or living trust, with the former being created through a provision in the Settlor’s Will and not activating until after the Settlor’s death and the latter being created and administered during the lifetime of the Settlor. Whether a trust is revocable or irrevocable hinges on the Settlor’s ability to modify or terminate the trust.
Trustee Duties and Responsibilities
The Trustee, appointed by the Settlor through the trust agreement, assumes a pivotal role in executing the trust’s terms. This encompasses a spectrum of responsibilities, ranging from interpreting and adhering to trust terms to asset protection, investment decisions, communication with beneficiaries, asset distribution, conflict resolution, legal defense, meticulous record-keeping, and management of trust tax affairs.
Within the realm of trust administration, the choice of a sole Trustee or Co-Trustees is something a Settlor should spend significant time deliberating. While a Settlor reserves the right to designate any individual as a Trustee, the option of Co-Trusteeship is something people often consider. As with any estate planning decision, the path of Co-Trusteeship presents both advantages and disadvantages. Among the advantages of appointing Co-Trustees are:
- Mitigating Familial Discord: Opting for Co-Trusteeship can prevent potential conflicts among family members, particularly when siblings are involved, by avoiding the designation of a single Trustee.
- Blending Trustworthiness and Expertise: Co-Trusteeship enables the blend of familial trustworthiness with the professional acumen of a financial or legal expert, ensuring a comprehensive approach to trust management.
- Built-in Sounding Board: The presence of multiple Co-Trustees can create a natural support system, providing a platform for collaborative decision-making and alleviating the individual pressures on each Trustee.
There are also drawbacks to appointing Co-Trustees that a Settlor should consider before making the decision to go that route, such as:
- Escalating Administrative Costs: Each Trustee is entitled to a fee, and the appointment of multiple Co-Trustees proportionally increases the cost of trust administration.
- Decision-Making Delays: Co-Trusteeship may result in prolonged decision-making processes, especially if unanimous agreement among all Co-Trustees is a prerequisite for action.
- Gridlock in Even Numbers: In situations where there is an even number of Co-Trustees, the potential for decision-making gridlock arises if a unanimous consensus cannot be reached.
- Potential for Family Conflict: Designating siblings or family members as Co-Trustees may inadvertently introduce familial conflicts into the administration process.
- Professional and Non-professional Dynamics: The collaboration between a professional and a non-professional Trustee may lead to confusion and frustration, emphasizing the importance of a coherent and well-defined working relationship.
Do You Have Questions about Appointing Co-Trustees?
For more information, please attend one of our upcoming FREE webinars. If you have additional questions about appointing Co-Trustees, contact an experienced Essex Junction estate planning attorney at Unsworth LaPlante, PLLC by calling 802-879-7133 to schedule your appointment today.