When establishing a trust, a person must decide whether they want a single trustee or co-trustees. The trustee manages and oversees the assets held in the trust, so this decision should not be made lightly. Many people turn to an estate planning attorney for help making this choice.
Trustee Responsibilities
A trustee has a fiduciary duty to act in the best interests of the trust beneficiaries. They must administer the trust, manage investments, keep records, and handle other accounting tasks. This individual has to ensure the estate complies with all tax rules and regulations. As they carry out these duties, they should communicate with beneficiaries to keep them informed.
The trustee must protect the trust assets. They also have the authority to terminate this trust when specific conditions are met. When handling these tasks, the trustee has the authority to make decisions.
Trustee responsibilities vary. The trust terms, assets included in the trust, and applicable laws and regulations determine what is required of this person. If an individual fails to fulfill their duties, the beneficiaries can hold them personally responsible for any losses or damages incurred. The co-trustee responsibilities remain the same. Multiple people share them.
Why Should Co-Trustees Be Considered?
A single trustee acts independently when overseeing and managing the trust, while co-trustees work together to carry out these duties. Multiple people taking on this role increases accountability and ensures balanced decision-making. However, naming a single trustee reduces the possibility of conflicts arising.
Benefits and Drawbacks of Co-Trustees
One reason a person might name co-trustees is that they want a system of checks and balances in place to reduce the risk of abuse by the trustee. Trust assets can be managed more effectively when multiple people oversee these assets. They each bring their expertise to the arrangement, which allows for better trust management.
Naming a single trustee allows for quick and efficient decisions, as only one party makes them. Fees associated with trust administration are typically lower when only one trustee is named. However, care must be taken to ensure co-trustees can work together.
If the relationship is contentious, a third party may need to be brought in to mediate. This relationship can add to trust administration costs. For example, children who do not get along should not be named co-trustees, as every decision that must be made will become an argument. The same applies if co-trustees are named and one party is more forceful. They will likely make all the decisions, as the other party will allow them to do so.
Nevertheless, naming one person as the trustee comes with risks. This individual may mismanage the trust intentionally or unintentionally. Fraud is always a concern when one person oversees another party’s assets, and this person might abuse the trust assets.
Talk with an estate planning attorney to learn more about the benefits and drawbacks of each option. The attorney will evaluate the trust to see if the trustee needs particular expertise to manage and administer it. They will also look for potential issues and determine the time required for trust administration and management. As the attorney has helped other clients take this step in the past, they are aware of potential pitfalls and how to avoid them. The person establishing the trust can have peace of mind knowing their assets will be protected.