A trust is among the most common additions to an estate plan. If you decide to establish a trust, one of the most important decisions you will need to make is who to appoint as the Trustee of your trust. One option is to appoint more than one Trustee. An Indianapolis attorney at Frank & Kraft discusses the pros and cons of appointing Co-Trustees.
Trust Basics
A trust is a legal arrangement that involves a Settlor (the creator of the trust) who appoints a Trustee to protect and manage assets intended for the benefit of a third party or parties known as the trust “beneficiary” or “beneficiaries.” Trusts are broadly divided into two categories – testamentary and living trusts. A testamentary trust is not officially created until after your death through a provision in your Last Will and Testament while a living trust is created and administered during your lifetime. Certain trusts can also be revocable or irrevocable, meaning that the Settlor does or does not have the ability to modify or terminate the trust.
Trustee Duties and Responsibilities
The Settlor (creator) of a trust appoints the Trustee in the trust agreement, the legal document used to create a trust. The overall job of a Trustee is to administer the trust using the terms and provisions created by the Settlor in the trust agreement. Some of the specific duties and responsibilities of the Trustee include:
- Understanding and adhering to the trust terms
- Protecting and managing trust assets
- Investing trust assets
- Communicating with trust beneficiaries
- Distributing assets to the beneficiaries
- Making decisions about discretionary distributions
- Resolving conflicts
- Defending the trust if the trust is involved in litigation
- Keeping detailed records
- Filing trust tax returns and paying any taxes due
Is Appointing Co-Trustees the Right Choice?
As the Settlor of a trust, you can appoint anyone you choose to be the Trustee. You can also appoint more than one Trustee. People choose to appoint Co-Trustees for a variety of reasons, such as:
- Not wanting to offend one adult child by appointing another child as the sole Trustee.
- Appointing a family member and a professional under the belief that you “trust” the family member but the professional can provide practical guidance.
- Thinking that appointing more than one Trustee takes the pressure off of each Trustee and gives the Trustee’s a built-in “sounding board.”
While all of these are legitimate explanations for appointing Co-Trustees, and may even be considered as “pros” when debating the use of more than one Trustee, there are several important “cons” to appointing Co-Trustees, including:
- Trustees are entitled to a fee. As such, the more Trustees you appoint the higher the cost of administering the trust will be.
- Having more than one Trustee can cause delays if all Trustees are required to agree before taking action.
- If you have an even number of Trustees, decisions can be impossible to make if the Trustees cannot agree.
- You can inadvertently cause conflict in the family if you appoint siblings or family members as co-Trustees.
- A professional and non-professional Trustee typically creates confusion and frustration. If you do not want to name a professional as the sole Trustee, name a family member who can then hire an attorney and/or financial advisor to provide them with guidance during the administration of the trust.
Do You Have Questions about Who to Name as the Trustee of Your Trust?
For more information, please join us for an upcoming FREE seminar. If you are contemplating naming Co-Trustees for a trust you are creating, and you have additional questions, contact an experienced Indianapolis trust attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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