Deciding whether you should appoint co-trustees vs a single trustee to manage your trust should be taken seriously, and it is encouraged that you seek the guidance and counsel of an experienced estate planning attorney.
A co-trustee arrangement requires appointing two or more individuals or institutions to act together in managing the assets within your trust, while a single trustee operates alone to oversee the trust.
What Are the Responsibilities of a Trustee?
A trustee plays a vital role in managing and overseeing a trust, which involves a range of responsibilities and duties. These responsibilities stem from the fiduciary duty that a trustee owes to the beneficiaries of the trust, meaning that they must always act in the best interest of the beneficiaries. Some of the primary responsibilities of a trustee include:
- Administering the trust
- Investment management
- Recordkeeping and accounting
- Tax compliance
- Communication with beneficiaries
- Protecting trust assets
- Discretionary decision-making
- Trust termination
These responsibilities require a high level of trust and organization, so finding what arrangement works best for you may take time.
Where maximum accountability, balanced decision-making and distribution of responsibilities are prioritized, having more than one trustee can guarantee proper oversight of the trust’s management.
If you seek flexibility, simplicity and reduced potential for conflict, a single trustee arrangement may be more suitable.
It is important to note that the specific responsibilities of a trustee may vary depending on the terms of the trust, the type of assets involved, and any applicable laws or regulations. Trustees who fail to fulfill their fiduciary duties can be held personally liable for any losses or damages incurred by the trust or its beneficiaries. As such, serving as a trustee is a serious commitment that should not be taken lightly.
Advantages and Disadvantages
Co-trustees can act as a system of checks and balances for one another, reducing the likelihood of any mismanagement, fraud, or abuse of trust assets. With multiple individuals overseeing the trust, there is an added layer of accountability.
Appointing co-trustees with different areas of expertise can also be beneficial in managing your trust assets more effectively. For example, one co-trustee may have a strong financial background, while the other has expertise in real estate or tax planning. This diversity can lead to better overall management of the trust.
On the other hand, there are key advantages to having a single trustee managing your trust. Decisions can be made more quickly and efficiently, as there is no need to consult or reach a consensus with another trustee. This can be especially beneficial in situations where swift action is required or when dealing with time-sensitive matters.
Managing a trust can involve various expenses, such as legal fees, accounting fees, and trustee compensation. By having a single trustee, you can potentially reduce these costs, as there is only one individual or institution to compensate and coordinate with.
One of the disadvantages of co-trustees is when a difference in opinion occurs. One person may want to divest from an investment, such as real property or stock positions, and the other doesn’t. The trust investment doesn’t provide guidance, and either course of action is in line with their fiduciary duty. One way to deal with this situation is to have a neutral third party, who can act as a mediator or tiebreaker when there are disputes or disagreements.
That said, having a single trustee also comes with certain risks, such as the potential for mismanagement, fraud, or abuse of trust assets. It is crucial to carefully consider your needs and the specific circumstances of your trust when deciding whether a single trustee is the most suitable choice. As with any aspect of estate planning, it is essential to consult with an experienced estate planning attorney to help you make the most informed decision.
How Can My Attorney Help Me Decide?
An attorney can help you decide by weighing the factors that might affect the advantages and disadvantages mentioned above. The attorney should have expertise in trusts to evaluate, for example, whether a trust requires special expertise, has legal issues, and has a heavy workload.
Estate planning consultations are available virtually and in the office, and David is happy to help clients throughout California. He has helped thousands of families successfully set and reach their estate planning goals. David sees clients by appointment only to ensure that each has his undivided attention.
Contact us to schedule a free consultation today at 805-374-8777 or dschneider@drs-law.com. We look forward to hearing from you and helping you set up your comprehensive estate plan, including a trust, a pour-over will, durable power of attorney, advanced healthcare directive, and nomination of guardian and/or special needs trust, where needed.
You can learn more about the Law Offices of David R. Schneider and read past blog posts here.