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Co-Trustees vs. Single Trustee—Which Should You Choose?

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Deciding whether you should appoint co-trustees vs. a single trustee to manage your trust should be taken seriously. You should also seek the guidance and counsel of an experienced estate planning attorney.

A trustee plays a vital role in managing and overseeing a trust. Doing so involves a range of responsibilities and duties. Responsibilities stem from the fiduciary duty that a trustee owes to the beneficiaries of the trust. This means that they must always act in the best interest of the beneficiaries.

Some of the primary responsibilities of a trustee include:

  • Administering the trust
  • Investment management
  • Recordkeeping and accounting
  • Tax compliance
  • Communication with beneficiaries
  • Protecting trust assets
  • Discretionary decision-making
  • Trust termination

These responsibilities require a high level of trust and organization. So finding what arrangement works best for you may take time.

A co-trustee arrangement requires appointing two or more individuals or institutions to act together in managing the assets within your trust. A single trustee operates alone to oversee the trust.

If maximum accountability, balanced decision-making and distribution of responsibilities is a priority, then having more than one trustee can guarantee proper oversight of the trust’s management. If you seek flexibility, simplicity and reduced potential for conflict, a single trustee arrangement may be more suitable.

It is important to note that the specific responsibilities of a trustee may vary depending on the terms of the trust, the type of assets involved, and any applicable laws or regulations. Trustees who fail to fulfill their fiduciary duties can be held personally liable for any losses or damages incurred by the trust or its beneficiaries. As such, serving as a trustee is a serious commitment that should not be taken lightly.

Advantages and Disadvantages

Co-trustees can act as a system of checks and balances for one another. This reduces the likelihood of any mismanagement, fraud, or abuse of trust assets. With multiple individuals overseeing the trust, there is an added layer of accountability.

Appointing co-trustees with different areas of expertise can be beneficial in managing your trust assets more effectively. For example, one co-trustee may have a strong financial background, while the other has expertise in real estate or tax planning. This diversity can lead to better overall management of the trust.

On the other hand, there are key advantages to having a single trustee managing your trust. Decisions can be made quickly and efficiently. There is no need to consult or reach a consensus with another trustee. This can be especially beneficial in situations where swift action is required or when dealing with time-sensitive matters.

Managing a trust can involve various expenses, such as legal fees, accounting fees, and trustee compensation. By having a single trustee, you can potentially reduce these costs, as there is only one individual or institution to compensate and coordinate with.

One of the disadvantages of co-trustees is when a difference in opinion occurs. One person may want to divest from an investment, such as real property or stock positions. The other doesn’t. The trust investment doesn’t provide guidance, and either course of action is in line with their fiduciary duty. One way to deal with this situation is to have a neutral third party, who can act as a mediator or tiebreaker when there are disputes or disagreements. If such a person is not nominated, the result is often a court battle.

One of the most common requests / statements from clients is “I just don’t want my children to fight!”  The thought of naming co-trustees to “keep it fair” is likely the wrong approach; if they had already shown a tendency to disagree, forcing the kids to act together will usually exasperate the situation.

That being said, having a single trustee also comes with certain risks. This includes the potential for mismanagement, fraud, or abuse of trust assets. It is crucial to carefully consider your needs and the specific circumstances of your trust when deciding whether a single trustee is the best choice. As with any aspect of estate planning, it is essential to consult with an experienced estate planning attorney to help you make the most informed decision.

Another aspect to consider is the personalities, particularly when looking to your family as your potential successor trustees, both as a single trustee or co-trustee.  Notwithstanding that the children may love each other, if one has a dominating personality, this trait is likely to show through in their actions while acting as trustee.

How Can My Attorney Help Me Decide?

An attorney can help you decide which type of successor trustee set up you should have. Weighing the factors mentioned above that affect the advantages and disadvantages. The attorney should have expertise in trusts to evaluate, for example, whether a trust requires special expertise, has legal issues, and has a heavy workload. Additionally, the experience of the attorney is important in evaluating the traits and/or personalities of the potential trustee choices. This helps the client choose successor trustees which not only have the savvy to perform, but will avoid problems the attorney has likely witnessed countless times before.

You can learn more about the Law Offices of David R. Schneider and read past blog posts here.

David R. Schneider specializes in estate planning, bankruptcy, probate work, and business services. David is known for his personal and client-oriented services. Visit DRS Law.