A trustee is a person responsible for managing and distributing the assets held in trust according to the terms laid down by the grantor. That means that the trustee plays a critical role in safeguarding the interests of the trust’s beneficiaries, as well as making certain that the grantor’s wishes are followed.
Should you consider appointing more than one trustee? No law says that you can’t have multiple people in charge of a trust – but that doesn’t necessarily mean it’s a good idea, either.
What can go wrong when you have multiple trustees?
While you can name as many trustees as you want, more trustees simply means there’s an increased potential for problems. Consider these:
- Each co-trustee has to read and follow the rules of the trust according to the best of their abilities and their own understanding. If two trustees don’t agree on what that means, that can create a deadlock that stops the beneficiaries from receiving any assets until the dispute is resolved.
- Each co-trustee can be held responsible for the other’s breach of their fiduciary duty. That means that they can both be held liable for the other’s poor investment decisions, fraud, self-dealing or other misuses of their power. That can create a lot of hostility between co-trustees, especially if they distrust one another.
- Every action taken on behalf of the trust will require two (or more, depending on how many trustees you name) signatures. Coordinating that can become a nightmare if the trustees aren’t both readily available. That could lead to missed opportunities, problems with disbursements and critical lapses in action.
In general, there’s very little benefit to having multiple trustees – but a lot of potential drawbacks.
What can you do instead of naming co-trustees?
Most of the time, the motivation for having co-trustees is to make sure that the trust will continue to operate smoothly even if a trustee is suddenly unable or unwilling to continue serving.
There are two potential solutions to this problem. First, you can simply designate successor trustees. They can step in if something happens to the first trustee. Second, you could hire a professional trustee. Professional trustee services can help alleviate numerous concerns, including the worry about what would happen if a private trustee dies or becomes incapacitated.
When you’re creating a trust, legal guidance can make it easier to understand the pros and cons of every decision you make so that you can keep your legacy intact.