Friday, January 27, 2023
Article: The More the Merrier? Issues Arising from Co-Trustees Administering Trusts
David Johnson (Winstead PC) recently published an article, The More the Merrier? Issues Arising from Co-Trustees Administering Trusts, 15 Estate Planning Journal, 2023. Provided below is an introduction to the Article:
Settlors can draft a trust to have one trustee that has the sole authority and power to administer the trust. However, settlors can, and often do, require or allow a trust to be administered by co-trustees. Co-trustees generally have equal rights to administer the trust and should administer the trust in all respects together as a unit. There are certain advantages and drawbacks to using a co-trustee structure to administer a trust. Further, there are a number of permutations that can be used to effectuate a co-trustee management structure.
The co-trustees can be any potential combination. One potential combination is a settlor and a corporate trustee acting as co-trustees. In this example, the settlor intends for the corporate trustee to take the lead on investing and accounting functions, but the settlor is involved in big picture issues and distributions. Further, co-settlors (e.g., husband and wife) can create a trust with themselves as co-trustees so they can have equal say in how the trust is administered. Further, a settlor may want a corporate trustee and a family friend to be co-trustees. The thought once again, is that the corporate trustee takes the lead on investing and accounting functions, but the family friend knows the family dynamics, the settlor’s intent and is involved in big picture issues such as distributions. There is no limit to the combinations of co-trustees or the purposes of same.
When a trust is administered by co-trustees, many issues can arise. This Article is intended to address some of the more common issues so that settlors and potential trustees can evaluate the ramifications of co-trustee administration.
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