Why You Shouldn’t Designate Cotrustees

When parents are considering whom to designate as successor trustee to administer their trust upon their death, they often consider making their adult children cotrustees. This may eliminate the parents’ stress of choosing among their children, but it often creates other stress for the children who are designated. It’s generally well-intentioned, but often a bad idea.

Unless otherwise provided in the trust instrument, a power vested in two or more cotrustees may be exercised only by their unanimous action. Prob C §15620. This assumes the cotrustees can work together and are “on the same page.” This may not be true of siblings, whose relationship may have a history of small slights or grudges that is exacerbated by the trauma of parental loss.

To deal with this issue, the trust may allow action by a majority of trustees, but this doesn’t solve the problem when there are two cotrustees.

Dividing the duties among the trustees isn’t always an option, because cotrustees aren’t allowed to delegate their responsibilities to another cotrustee or anyone else, with the exception of investment and management functions under Prob C §16052. And even when specific duties are properly delegated, each trustee must exercise general supervision over the trust. Prob C §16012.

So what can happen when cotrustees disagree? Either a stalemate develops and no action is taken, or action is taken contrary to the best judgment of one or more cotrustees. These problems may need to be resolved by a petition to the court under Prob C §17200(b)(6) for instructions.

Another possibility, if one cotrustee takes an action that another cotrustee considers a breach of fiduciary duty, is that the objecting cotrustee petitions the court under Prob C §16420 to enjoin further improper conduct or to set aside the action. In fact, not seeking the court’s intervention to undo another cotrustee’s breach of trust may be committing a breach of trust and may result in liability for any damage that results.

Ongoing disagreements could result in a cotrustee either resigning or petitioning for removal of the other cotrustee under Prob C §§15642(b)(3) and 17200(b)(10), alleging that the lack of cooperation has impaired the proper administration of the trust.

But petitioning to the court costs time and money, the very things the trust instrument helps mitigate. The best route is to name only one trustee to serve at a time, with a successor trustee named if that person can’t serve. If fear of hurt feelings is at issue, the parents should name a neutral third party as successor trustee or have a family meeting where they explain their decision to their children, or both.

For all you need to know about cotrustees and shared fiduciary powers, turn to CEB’s California Trust Administration, chap 3 or Drafting California Revocable Trusts, chap 16 .

Other CEBblog™ articles you may find useful:

© The Regents of the University of California, 2019. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

One thought on “Why You Shouldn’t Designate Cotrustees

  1. Another approach to setting the succession and avoiding hurt feelings. Select nominees based upon:

    1) age: OR
    2) geographic proximity; OR
    3) available time to deal with the “burden”; OR
    4) career of children. E.g. an accountant or bookkeeper may have an easier time, OR
    5) change nominations for Advance Health Care Directive, or (possibly), the Durable POA.

    Good article.

    Gene

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