Be Careful What You Wish For—Problems with naming Co-Trustees
A living trust is a legal document that serves your during your lifetime and at your death. When you create a living trust, you are typically the trustee (the person in charge of the trust) and the settlor (the creator of the trust). When you pass away your back-up agent (successor trustee) will step up to administer your estate. In addition, if you become unable to manage your assets due to health reasons, you can voluntarily resign or be removed as trustee by a doctor’s note.
Often, parents look to their adult children to serve as their successor trustees. When parents have more than one child, sometimes they feel like they need to name all their children to act together as co-trustees. They are worried about hurt feelings, or the truly believe that they are making it easier for their children by having them act together.
Before determining whether having multiple children serve as co-trustees together, you should consider that there are simply some practical administration issues. For example, many trusts require that the co-trustees must act together, meaning 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, it depends on whether financial institutions will honor the language (some do not or make it really 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 children may have good relationships with each other now, stepping into the role of trustee due to a family crisis like death or serious health problem 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.
As noted above, the proximity of where your co-trustees live to each other and to you can impact the trust administration. The co-trustee that lives locally often is burdened with much more of the day-to-day work. Not only can having a non-local co-trustee slow the process down, but it can often create resentment amongst co-trustees.
For many families, having one child serve as sole trustee is often the best solution. However, if you really believe choosing one child over another will cause a fight, you can opt to appoint an independent trustee. Specifically, a corporate trustee (e.g., a bank or financial institution), or a private professional fiduciary (an individual, licensed and bonded by the State of California.
It is important to carefully consider whether or not co-trustees are the best fit for you and your family. Please visit our website at www.SanJoseElderLaw.com, or call (408) 286-2122 to schedule your complimentary consultation if you would like to discuss successor trustee options.
All materials have been prepared for general information purposes only to permit you to learn more about our firm, our services and the experience of our attorneys. The information presented is not legal advice, is not to be acted on as such, and may be subject to change without notice.