A trustee manages and distributes assets in a trust. A trustee can be is an individual or a financial institution. At times, clients may choose to name two or more individuals as co-trustees in their trust document to perform these duties together. Appointing co-trustees encourages an extra degree of deliberation when making distribution decisions or deciding on investment strategies.
Generally, co-trustees must agree when making decisions, either unanimously or by majority. The statutory default is by majority when there are at least three trustees and unanimous if only two trustees. However, the terms of the trust control. Sometimes we draft trusts to allow one co-trustee to act independently. For example, a trust may forbid a co-trustee who is also a beneficiary from making distributions of assets to themselves. This provision protects the beneficiary from creditors since they have no mandatory right to the assets. The same provision can protect beneficiaries from themselves.
The decision to appoint more than one trustee in your trust should be explored with an experienced estate planning attorney. While you may hope that co-trustees will get along and agree on the management and distribution of the trust assets, this is not always the case. Your trust document should plan for the possibility that your trustees will not peacefully reach a decision.
You can avoid conflict by including language in your trust that dictates how to resolve specific disagreements. Best case scenario is that court intervention is sought to resolve a specific dispute. However, a serious conflict between co-trustees leads to a stand-still in the administration of the trust. In such cases, one or more co-trustees may seek to remove another co-trustee. The use of such court intervention is costly and hinders the effectuation of the trust’s purpose.
When co-trustees cannot agree on the management or distribution of a trust’s assets, the beneficiaries of the trust suffer. Trust assets can be tied up in years of litigation instead of being resolved promptly and efficiently. It is wise to review your trust document every few years with an attorney to “stress test” such scenarios. An experienced estate planning attorney can strategically plan for possible disagreements among trustees.