The Pros and Cons of Appointing Co-Trustees

Choosing a trustee is a critical aspect of trust creation. If the trustee is unqualified or unreliable, the impact on beneficiaries could be significant. Potential problems range from sloppy record-keeping that leaves beneficiaries uncertain and slow administration that may delay distributions to a significant loss in value of the trust assets through mismanagement or outright theft.

Appointing co-trustees may seem like a good choice for many reasons. For example:

• Having two trustees can act as a safeguard, since there is a second person with access to records and responsibility for management and monitoring
• In theory, having two trustees reduces the burden on each, since the work is shared
• Co-trustees may have complementary skills—for example, one may have excellent organizational and administrative capabilities, while another is expert in managing and growing assets
• The grantor may believe that appointing co-trustees will alleviate family tensions since decision-making power won’t lie in the hands of a single family member

However, some grantors choose to appoint co-trustees for the wrong reasons. One common reason is to keep the peace in a family. For example, a grantor with two adult children might recognize that one of those children is better equipped to serve as trustee. However, he or she may feel that appointing one child over the other will be hurtful, or that the imbalance in treatment will create conflict between the children.

Similarly, a grandparent setting up a trust for grandchildren might be naturally inclined to appoint the children’s parents as co-trustees. If the children are minors and their parents are married, this may seem like a logical extension—the parents are already sharing the care of and decision-making for the children. However, if the parents later separate or divorce, their ability to work together for the benefit of the children may be compromised, putting the trustee’s goals at risk.

Even when the grantor’s reasoning is based in more practical considerations, the use of co-trustees carries special risks which may outweigh any benefits.

The Downside to Appointing Co-Trustees

Many of the pitfalls associated with appointing co-trustees are closely related to the advantages and perceived advantages listed above. For example, having two trustees allows them to share the load, potentially reducing the demands on each. However, the co-trustee structure also opens the door to confusion and inefficiency. Important tasks may slip through the cracks as one trustee assumes the other is attending to them, and this can easily lead to conflict between the co-trustees.

Similarly, family members may see joint trustees as a fairer arrangement than putting trust management and decision-making power in the hands of a single person—particularly if that person is a family member. However, there’s no majority rule when there are two co-trustees. Instead, every decision is unanimous or a deadlock. When the co-trustees can’t agree, resolving the issue can be costly and time consuming. In addition to the cost in dollars and lost time, disagreements between trustees can escalate the very tensions the grantor may have been trying to avoid by appointing co-trustees.

Are Co-Trustees Right for Your Trust?

Choosing the right trustee or right combination of trustees can be difficult. In some cases, a single family member will be the best choice. In others, co-trustees or a neutral party serving as trustee may be a better option. An attorney experienced in trust creation can assist you in making the right choice for your family.