Should I Appoint Co-Trustees to Administer My Arkansas Trust?

Co-Trustees Arkansas

Creating a trust gives you considerable control over how your assets are managed and ultimately distributed to the people and organizations you choose. The effectiveness of that trust, though, will depend in large part on the person or people responsible for administering it. When creating your Arkansas trust, you may instinctively consider appointing two or more people to serve together as Co-Trustees, particularly if you have multiple adult children and do not want to appear to favor one over another. In other situations, you may believe that pairing a family member with a professional will provide an ideal combination of personal knowledge and financial expertise. Although appointing Co-Trustees can offer important advantages, it can also create disagreements, administrative delays, additional expenses, and even litigation. Before deciding whether Co-Trustees are right for your Arkansas estate plan, it is important to understand what Trustees do and how sharing those responsibilities can affect trust administration. With that in mind, the attorneys at Wilcox Attorneys, PA discuss the benefits and drawbacks of appointing Co-Trustees to administer your Arkansas trust.

Understanding the Role of a Trustee

A trust is a legal relationship involving several important parties. As the person creating the trust, you are commonly referred to as the Grantor. The Trustee is the individual or entity responsible for managing and administering property held by the trust, while the Beneficiaries are the individuals or organizations intended to benefit from the trust.

During your lifetime, you may serve as Trustee of your own Revocable Living Trust, allowing you to continue managing trust property much as you did before transferring the property into the trust. You must nevertheless appoint someone to take over (Successor Trustee) when you can no longer serve because of incapacity or after your death. With an Irrevocable Trust, or even sometimes with a Revocable Living Trust, another person or entity may serve as Trustee from the outset.

Because a Trustee serves in a fiduciary capacity, the position carries significant legal responsibilities. Consequently, selecting a Trustee should be based on the person’s qualifications, judgment, integrity, and ability to administer the trust rather than solely on family relationships.

What Does It Mean to Appoint Co-Trustees?

Instead of appointing a single individual or institution as your Trustee, you have the option to structure your trust so that two or more people share responsibility for its administration. For example, you might appoint two adult children as Co-Trustees or you might appoint an adult child to serve alongside a professional or corporate fiduciary. The precise responsibilities and decision-making authority of the Co-Trustees will depend upon the provisions of the trust agreement and applicable law.

At first glance, shared responsibility may appear preferable to placing all authority in the hands of one person. In practice, however, the success of the arrangement often depends on the personalities involved, their relationship with one another, the complexity of the trust, and how clearly the trust agreement addresses their respective authority.

Co-Trustees Can Bring Different Strengths to Trust Administration

One potential advantage of appointing Co-Trustees is the ability to combine people with complementary skills. Imagine that one of your adult children understands your family dynamics exceptionally well but has limited experience managing investments or complicated financial matters. You might consider appointing that child alongside someone with stronger financial or administrative experience. Similarly, a trust containing a closely held business, substantial investment portfolio, multiple parcels of real estate, or other complicated assets may benefit from different areas of expertise. For example, a Co-Trustee who understands the family may provide valuable context when discretionary distributions are requested while another Trustee with financial expertise may be better equipped to evaluate investments, tax considerations, or complicated trust assets.

Shared Decision-Making Can Provide Additional Oversight

Appointing Co-Trustees can also create a system of checks and balances given that a sole Trustee may have substantial discretion and authority over trust property. With multiple Trustees, significant decisions may receive additional consideration before action is taken and one Trustee may identify an issue the other overlooked. They can discuss alternatives, question assumptions, and evaluate difficult decisions from different perspectives. This additional oversight may be particularly valuable when a trust holds substantial wealth or requires difficult discretionary decisions affecting multiple Beneficiaries. This built-in accountability can be beneficial, but only when the Co-Trustees respect one another and can reach decisions efficiently.

Co-Trustees Can Divide a Significant Workload

Administering a trust can require substantial time and attention, particularly following the Grantor’s death. A Trustee may need to locate property, obtain valuations, communicate with financial institutions, and secure real estate as well as maintain insurance, oversee investments, pay debts, and make distributions.

With Co-Trustees, some of this work can potentially be divided with one Trustee taking primary responsibility for communicating with Beneficiaries while the other focuses on financial matters. Likewise, if the trust contains real estate, one Trustee may oversee property-related issues while the other coordinates with accountants or investment professionals. Sharing administrative responsibilities can prevent one individual from becoming overwhelmed and may allow tasks to be handled by the person best suited to perform them.

Co-Trustees May Provide Continuity

A trust can continue for years or even decades and during that time, a Trustee could die, become incapacitated, resign, move away, or otherwise become unable or unwilling to continue serving. Having more than one Trustee may provide continuity if one can no longer serve, which can be particularly important when the trust owns actively managed property, operates a business interest, or makes regular distributions to Beneficiaries.

Appointing All of Your Children May Not Promote Family Harmony

One of the most common reasons parents consider appointing Co-Trustees has little to do with trust administration. Instead, they simply do not want to hurt anyone’s feelings. By way of illustration, if you have three children you may worry that appointing only one as Trustee will make the others believe you favored that child. Naming all three as Co-Trustees may seem like an easy way to avoid conflict; however, your attempt to promote family harmony can have the opposite effect.

Unfortunately, children who have enjoyed a close relationship for decades may react very differently when money becomes involved causing old sibling rivalries to reappear or disagreements over investments or distributions to appear. Instead of preventing resentment, appointing all children as Co-Trustees can place them in circumstances that magnify existing differences.

Disagreements Can Cause Administrative Deadlock

The possibility of disagreement is among the most significant disadvantages of appointing Co-Trustees. While trust administration often requires decisions to be made that cannot be postponed indefinitely, disagreements between Co-Trustees can cause administration of the trust to grind to a halt. Moreover, a dispute among Co-Trustees that cannot be resolved privately may eventually require attorney involvement or judicial intervention, increasing expenses and potentially damaging family relationships.

Multiple Trustees Can Make Routine Administration Less Efficient

Even when Co-Trustees get along, involving several people can make routine administration cumbersome. For instance, imagine that a document requires signatures from multiple Trustees, but one Trustee lives in Arkansas while another lives across the country. A transaction that could have been completed promptly by one Trustee may require coordination among several people. Scheduling can become another problem with Co-Trustees if one Trustee is readily available, but another has work or family commitments that must be taken into consideration. Unfortunately, scheduling delays can affect the beneficiaries that are awaiting distributions and may complicate transactions involving trust property.

Co-Trustees May Increase the Cost of Trust Administration

A variety of expenses are routinely incurred during the administration of a trust, including expenses for legal advice, accounting, tax preparation, property management, investment services, appraisals, and other professional assistance. Multiple Trustees can noticeably increase those expenses because Trustees are typically entitled to reasonable compensation for their services. When several Trustees are serving, compensation and related administrative costs can consume more trust resources than would be required with a single Trustee.

Should I Pair a Family Member with a Professional Trustee?

Appointing both a family member and a professional Trustee to act as Co-Trustees may initially appear to be the perfect solution given that the family member understands the beneficiaries, family history, and your personal objectives while the professional brings technical knowledge and administrative experience to the arrangement. Sometimes that combination works very well; however, differences in perspective can also create frustration. Before using this structure, consider whether the two Trustees are likely to work effectively together and whether the complexity of the trust genuinely justifies professional involvement at the Trustee level.

Should You Appoint Co-Trustees for Your Arkansas Trust?

There is no universal answer to the question, but the decision should ultimately be based on your family relationships, intended beneficiaries, trust objectives, and the abilities of the individuals you are considering. An experienced Arkansas estate planning attorney can help you evaluate those factors and draft your trust so that the Trustee structure supports, rather than undermines, the objectives you created the trust to accomplish.

Do You Have Questions about Appointing Co-Trustees to Administer an Arkansas Trust?

For additional information, please sign up for one of our FREE estate planning webinars. If you have additional questions or concerns about appointing Co-Trustees to administer an Arkansas trust, contact the experienced Washington County, Fayetteville, Springdale, Rogers, Bentonville, and Northwest Arkansas estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.

Audra Wilcox
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