When drafting a trust or a will, you need to decide who'll be the trustee, or personal representative handling your estate when you die.
Individuals who serve in these roles are fiduciaries with a duty to properly administer your estate. When selecting a trustee or personal representative, many people gravitate toward individuals they feel should handle the task - for example, a surviving spouse or oldest child.
But you should also consider whether the person has the requisite time, financial savvy and attention to detail. Dealing with all the tasks to close an estate can be a tough, time-consuming job.
This may lead you to wonder about naming two people to the job so you take some of the burden off of a single person or combine the skills of one individual with the attributes of another. Or, you may have another reason altogether, such as not wanting to hurt someone's feelings.
Weigh the decision carefully. There are cases in which co-trustees or co-personal representatives work well together. But there are times when it can lead to delays in administration, strife and even litigation. You may think you're easing the burden when you may actually be adding to it.
If we choose to use co-trustees, the general rule in California is that both co-trustees must sign for each action require a signature. This can be problematic even if the co-trustees live in the same city. The trust agreement can revise the requirement to allow the signature or action of either co-trustee alone to bind the trust. While you can delegate the authority to act in this way, you can not delegate or allocate liability. Both co-trustees are liable for the actions taken even if one co-trustee does not know about the action taken by the other co-trustee.
If one co-trustee says "yes" and if the other co-trustee says "no", then you may end up in court for the resolution. If so, one attorney is needed for each co-trustee and another may be required for the trust. If two or three attorneys are involved, far greater costs will be incurred. To resolve that problem, consider appointing a "tie-breaker" who steps in to make a binding decision without going to court, which the co-trustees both must follow. A tie-breaker can be a far more efficient approach.
In many cases, it's best to have one trustee or personal representative because it's easier and more efficient. If the person named in your trust dies or cannot take on the role, a successor or alternate trustee or personal representative can (and should) be named.
If you believe you don't have anyone who can act alone, then selecting co-trustees may be the choice you want to make. Just make sure the two parties can work together.
There are many choices, including:
- A surviving spouse and an adult child,
- A surviving spouse or child and a professional, such as an independent private fiduciary,
- Two or more adult children,
- A family member and a business partner, or
- A family member and an institution, such as a bank or trust company.
Sometimes a good team is a relative who knows the dynamics of the family and a professional or institutional fiduciary who can handle the financial aspects of the estate. This usually works better than having two family members handle the job. Why? Two family members may have a tendency to bring emotional baggage into the picture - if there's any to bring.
Keep in mind, however, that more than one person can slow the process. For example, let's say you have two children and you want to name them both because you don't want either one to feel left out. In this scenario, they may both have to sign all documents related to the estate, including tax returns and checks to pay debts. This can be cumbersome, especially if they live far from each other.
Another concern with co-trustees is that they may attempt to act alone. Communication is key. Co-trustees or co-personal representatives should keep each other informed and consult with each other before making decisions.
If the two people aren't on the same page, there could be a claim of breach of fiduciary duty if one of them believes the other is mismanaging the estate. In some cases, one of the individuals may go to probate court and ask for the other to be removed.
As you can see, it's often advisable to name one trustee or personal representative.
However, if you still want to name two or more people, choose carefully. Consider appointing a tie breaker. Also, keep in mind that if co-trustees or co-personal representatives have different attorneys, the attorneys should consult each other before making any decisions. Call our office if you want additional guidance with this challenging issue.