How Do Co-trustees Operate?

How Do Co-trustees Operate?Some trusts are set up to have co-trustees, which is when there is more than one trustee on the trust. And unless the trust specifically is written otherwise, co-trustees hold the same fiduciary responsibilities as a singular trustee and with an equal amount of power.

Ultimately, co-trustees are accountable for managing and overseeing the trust in the best interests of its beneficiaries. And, again, unless specifically indicated on the trust, co-trustees must act unanimously (or sometimes with a majority if there are more than 2 trustees) and be in agreement when making decisions. In limited circumstances if a co-trustee is unavailable, the remaining co-trustees may act.

Pros and Cons

There are both pros and cons to having co-trustees on a trust.  On the positive side, having 2 or more trustees can reduce the burden placed on just one individual and perhaps utilize complimentary skills of different people.  Further, it may help reduce family tension if, for example, both siblings are chosen to serve in the trustee role as opposed to having a parent choose between the two.

However, trying to keep family peace by having co-trustees may also lead to the unintended consequence of family members butting heads and struggling to come to agreements about the best course of action related to the trust.  In addition to the family discord, co-trustee disagreements that are unable to be resolved can lead to prolonged and costly litigation.

Legal Liabilities

Should co-trustees be stalemated on a decision, one or more of the co-trustees can take one another to court or can file a court petition for instructions.

If a co-trustee does not appropriately handle his or her fiduciary responsibility, they can be liable for a breach of duty. And, if a co-trustee takes an action that the other co-trustee believes is a breach of duty, the non-breaching co-trustee (or the beneficiary) can consider filing a court petition with the probate court for removal of a trustee, or sue (perhaps for financial losses) for mismanagement of a trust. Hostility between co-trustees can also be a ground for removal of a trustee.

In some circumstances, a co-trustee might be allowed to resign if there are disputes with the other co-trustee; but, if the resignation allows the other co-trustee to commit an anticipated breach, the resignation itself could be considered a breach of duty to protect the trust.

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