Do Both Trustees Have To Sign?

Co-Trustees: Definition

The term co-trustee refers to an individual or entity elected to serve alongside another trustee on a trust. Co-trusteeship occurs when two or more trustees share responsibility for managing and administering the trust assets.

This arrangement benefits estate planning by enabling complicated plans to run smoothly, distribute responsibilities, and ensure continuity.

 

In Creating Your Estate Plan, Will You Consider Co-Trustees?

When creating your estate plan, you can consider appointing co-trustees if you need more than one person to serve as the successor trustee. When developing an estate plan, using co-trustees has advantages and disadvantages.

A reasonable Attorney can help you determine whether a co-trustee appointment suits your situation. Co-trustees in California work with living trusts in the following general way:

• An instrument of trust may prescribe equal powers or a division of powers for co-trustees.
• In some cases, two trustees must get the consent of the other to take specific actions. While in some other cases, one co-trustee can take action alone.
• Other trustees do not need to consent to disclose trust information to beneficiaries. Co-trustees can only do this with the other trustees’ approval.
• It is the fiduciary duty of all co-trustees to perform specific tasks.
• The trust can be liable for the breach of one co-trustee.
• Occasionally, co-trustees can be liable for one another’s breaches.
• Co-trustees can need each other to disclose all relevant information.
• It is their responsibility to report any suspected breaches as soon as possible.
• Co-trustees can sue one another if there is a reasonable belief that a breach has occurred.
• Trustees are not required to accept the appointment or resign from their positions.

 

Co-trustees: How Do They Work?

When a trust has more than one trustee, we can call it a co-trustee. Co-trustees have the same fiduciary duties as sole trustees, with equal power and responsibility.

Co-trustees manage and oversee the trust in the beneficiaries’ best interest. Unless otherwise specified in the trust, co-trustees must act when making decisions and agree. Or sometimes with a majority if more than two trustees exist). Co-trustees may work if a co-trustee is unavailable under limited circumstances.

 

Duties of Co-Trustees

Trust co-trustees manage the trust’s assets together. Trusts often contain instructions on how trustees should use the trust’s assets. Trustees must understand the extent of their powers. Trusts should act in the interests of the named beneficiaries. Do trustees collaborate? (Unless stated otherwise by the trust)

 

Joint trustee cooperation

Additionally, co-trustees should collaborate unless specific responsibilities are explicitly assigned to each trustee by the trust. Even so, co-trustees should only work with their fellow trustees’ knowledge and consent. Frequently, a co-trustee asks if both co-trustees must sign a document, and the answer is yes.

There should also be a clear indication of joint trustee authority in the trust document. To prevent a fellow trustee from making decisions or acting in a certain way. A trustee has the right to put their objections in writing and file a petition in court. They will be free from legal liability from other trustees’ actions and decisions.

 

Co-Trustee Agreements: Their Purpose

A co-trustee agreement outlines who handles what and how decisions are made. It serves as a guide for how co-trustees should work together and manage the trust effectively.

 

A Co-Trustee Agreement’s Key Components

A co-trustee agreement must include the following provisions:

• Allocation of Responsibilities: Define the responsibilities and tasks of each co-trustee clearly.
• Decision-Making processes: Ensure guidelines are in place for making decisions, such as the need for majority or unanimous approval.
• Dispute Resolution: Describe mechanisms for resolving disputes between co-trustees.
• Compensation and Expenses: Provide details regarding co-trustee payment and reimbursement.
• Removal and Replacement Provisions: Describe how to remove or replace a co-trustee.

 

What Are The Criteria For Selecting Co-Trustees?

A solid estate plan is crucial because it gives you, your family, and your friends peace of mind. When distributing your assets and expressing your wishes after your death.

 

 

An estate plan can also include a medical and financial power of attorney documents. In addition to establishing trusts, consider installing them. To maintain privacy for your estate and loved ones and avoid the cost of administering your estate by going to court, avoiding probate is a primary reason.

As part of the trust formation process, you must appoint a successor trustee to administer your assets if you die. Co-trustees can be selected now, whether you have two or more in mind.

Suppose it is best to avoid naming your attorney as your successor trustee. Suppose you have an established attorney-client relationship. It might raise several ethical issues for your attorney.

 

The Legal Considerations of Co-trustees

 

Duties of Fiduciary

It is the co-trustees fiduciary duty to act in the best interests of the beneficiaries. In failing to do so, they may be legally liable.

 

Indemnity and Liability

 

Suppose co-trustees breach their fiduciary duties in any way. Including negligently mismanaging trust assets, they may be held liable. Indemnification provisions must be incorporated into co-trustee agreements to protect co-trustees from liability.

 

Implications for taxes

The co-trustees must ensure the trust complies with all applicable tax laws and regulations. They are responsible for filing tax returns, paying taxes, and maintaining accurate records.

 

Compliance with regulations

Co-trustees are also responsible for ensuring the trust adheres to any other applicable laws, regulations, and guidelines, such as investment and reporting requirements.

 

The Advantages of Co-Trusteeship

 

Making balanced decisions

Co-trustees’ presence allows for a more balanced approach to decision-making. Since it will enable many perspectives to be evaluated and considered, this arrangement can lead to more informed decisions that benefit the trust’s beneficiaries.

 

Responsibilities and duties distribution

Co-trustees can share the workload and responsibilities. This is associated with the trust administration to improve the efficiency of the trust administration process.

 

Smooth transitions and continuity

If at least one co-trustee remains, the trust can continue without disruption if the primary trustee becomes incapacitated or dies.

 

Collaborating and sharing expertise

Co-trustees can help the management of complex assets and address issues. That may arise during trust administration by having complementary skills and knowledge. Co-trustees can benefit the beneficiaries of their trust by leveraging their combined expertise.

 

Problems and Solutions

 

Coordination and communication

Communication and cooperation between co-trustees are crucial to successful collaboration. Setting clear expectations and communicating regularly can help mitigate potential misunderstandings.

Interests at odds

Co-trustees must avoid conflicts of interest. If a dispute arises, it must be disclosed and addressed immediately to ensure the integrity of the trust.

 

Incapacity to make decisions

Trustees’ agreements should include provisions about resolving deadlocks. Such as mediation or arbitration, to ensure the effective administration of the trust.

 

Co-trustees’ incapacities or deaths

An agreement or trust document defining the process for appointing a successor co-trustee should outline the incapacity or death of a co-trustee, ensuring a smooth transition and continued trust administration.

 

Are Co-Trustees Required To Act Together?

In California, trust law requires co-trustees to act unanimously. Allowing the trustees to work independently could make the administration process faster. However, trust documents stating they can act will override California trust law if they declare they can function independently.

 

Is It A Need For All Trustees To Sign Checks For Trust Accounts?

In many trusts, there are several trustees. This allows different trustees to bring other skills and knowledge to the belief. If a family member and a bank share the responsibility, the bank will handle the investments and the accounting. While the family member will consider the beneficiary’s needs and situation when making distribution decisions.

In most trusts, trustees can act on behalf of the trust. And those who rely on the trustee’s word should be able to depend on it. No trustee needs to sign every check issued by the trust.

However, most trustees also stipulate that all decisions must be made by consensus or a majority of the trustees. Nevertheless, these are two entirely different issues: decision-making and representation. Any trustee should be able to act on behalf of the trust by writing a check.

There is always the option of changing this standard and requiring all trustees to act together. However, this can make the trust operation quite cumbersome and inefficient.

 

When Co-Trustees Do Not Agree?

An individual or a financial institution may serve as a trustee. A trust’s trustee manages and distributes assets. Clients can sometimes designate two or more individuals as co-trustees in their trust document. They work together on these tasks. When making distribution decisions or deciding on investment strategies, appointing co-trustees encourages extra deliberation.

When making decisions, co-trustees generally must agree either unanimously or by majority. Generally, if there are at least three trustees, the default is by majority, while if there are only two trustees, the default is by unanimous.

Trusts sometimes allow a single co-trustee to act independently. For example, a trust may restrict the distribution of assets to a beneficiary who is a co-trustee as well. As creditors do not have an automatic right to support, beneficiaries can be protected from themselves from creditors under this provision.

 

Lawyers specializing in estate planning

Lawyers specializing in estate planning can assist you in deciding whether to appoint more than one trustee for your trust. Co-trustees may get along and agree on managing and distributing trust assets. But this is only sometimes the case. If your trustees cannot make a peaceful decision, your trust document should plan accordingly.

It is best to include language in your trust dictating the resolution of specific disagreements to avoid conflict. The best case scenario is that court intervention takes place to resolve the dispute.

However, a severe conflict between co-trustees could make the trust inactive for some time. One or more co-trustees may attempt the removal of another co-trustee. This type of court intervention is costly and hinders confidence from achieving its goals.

Having co-trustees disagree about managing or distributing trust assets is detrimental to the trust beneficiaries. Trustees can lose trust assets in years of litigation instead of being resolved promptly and efficiently by the trustees.

The estate planning attorney can help you plan for possible disagreements among trustees by reviewing your trust document every few years.

 

Are You Considering Removing A Co-Trustee?

It would help if you relied on something other than this article for legal advice from an experienced attorney, as it is for informational purposes only. The Attorney Real Estate Group has assisted numerous clients in the same position as you.

Be sure to seek the guidance you need if you believe one or more of your co-trustees have violated their fiduciary duties.

 

Faqs about Co-Trustees

 

When selecting co-trustees for an estate plan, what are some of the most important factors?

It would help if you chose co-trustees who are trustworthy, competent, and willing to serve as co-trustees. You can find potential co-trustees among family, friends, professionals, or trust companies. Depending on the needs and objectives of the trust, each co-trustee has advantages and disadvantages.

 

What should a co-trustee agreement include to ensure effective collaboration and management of trust?

The co-trustee agreement should describe the following:

• Who handles what,
• How decisions occur,
• How to resolve disputes,
• How to compensate and reimburse,
• And how to remove and replace members.

Co-trustees can use these components to provide a clear roadmap for effectively managing the trust.

 

What are some ways that co-trustees can contribute to a more practical estate plan?

Providing balanced decision-making and distributing responsibilities and duties. Ensuring continuity and smooth transition and bringing unique expertise to trust administration is the role of co-trustees. As a result of these benefits, estate planning can be more effective, and beneficiaries may benefit more.

Co-trustees face many challenges, such as:

• Communication problems,
• Conflicts of interest,
• And deadlocks in decision-making.

 

What can they do to offset these challenges?

Co-trustees must establish regular communication channels, set clear expectations, reveal and resolve conflicts of interest promptly, and include provisions for resolving deadlocks in the co-trustee agreement, such as mediation or arbitration, to mitigate potential challenges.

 

Conclusion

For trusts and estates to operate effectively, co-trustees play an essential role. Trust management is likely to be smooth through sharing responsibilities and bringing diverse expertise. A key aspect of selecting a co-trustee is choosing someone trustworthy and competent from your:

• Family,
• Friends,
• Professional advisors,
• Or a trusted company.

Co-trustees offer several advantages: distributed decision-making, continuity, and collaborative expertise. It is possible to resolve conflicts of interest, communication problems, and deadlocks in decision-making through clear agreements and effectively communicating.

Trustee co-trustees are liable for fiduciary duties, legal responsibilities, and taxes. That is crucial to ensure the trust operates and all regulations get followed.