It is important to take care when naming a co-trustee. If you’ve already created a revocable trust, congratulations—that means you’ve taken steps to protect the people important to you and eliminated concerns they may have about what will happen when you’re gone. A recent article, “3 Things to Consider when Naming Co-Trustees,” from The Street, asks if you should name an adult child as your co-trustee.
Most people name themselves as a trustee of a revocable living trust, allowing themselves to maintain control over how the funds are managed. As children become adults, you may start including them in your estate planning discussions, which may lead them to propose a relatively straightforward idea: letting them serve alongside you, by being named as co-trustees.
This might make sense. However, it may not. You need to ask some hard questions.
First, are you and your adult child in alignment on financial matters? If you are conservative when it comes to money and investing, but your child is a free-wheeling, come-what-may person, then you definitely don’t want to have them as a co-trustee. Not only will you disagree on how assets are to be used, you may also find yourself in a situation where your assets are funding a lot of fun, which is likely not what you have in mind for assets in a revocable trust.
As the primary trustee of the revocable trust, you have the legal power to fire a co-trustee. This presents another obstacle. Firing your child, especially if you’re firing one child and replacing them with another child, could lead to a lot of family friction. Many estate planning attorneys have seen what happens when parents are reluctant to act, even when it is crystal clear they need to be fired.
Second, does their logistical status make this person a good co-trustee candidate? Location and even time zones are not as confining as they used to be. However, there is a real benefit to being able to show up in person if something goes wrong. What if there’s an issue processing something and the bank will not accept a document sent by email or fax, but requires an in-person signature?
Your trust might include language allowing each co-trustee to act independently of the other. However you need to take care, this opens the door to the person you are naming a co-trustee being able to act unilaterally. If you’re still able to manage your own finances, you may not want to give up this amount of control to an adult child.
Would a co-trustee role with a child require you to revise the entire estate plan? For some trust creators, making one adult child their revocable living trust co-trustee means they need to change their estate plan to be fair to their other children. Sometimes they feel that another child should be named as a Power of Attorney or Health Care Power of Attorney.
“Fairness” or “keeping the peace” should never, ever, be a reason for children or other individuals to be named for estate planning roles. Each agent has a task to do in carrying out your wishes as directed by your last will and testament, POAs and trust documents. Naming a kid who’s a financial disaster as a co-trustee is asking for trouble. Naming someone who doesn’t share your beliefs about end-of-life treatment means your wishes are not likely to be followed.
However, it is possible to have your estate planning attorney create a workable co-trustee arrangement between you and an adult child. If they live close by, you mainly agree on financial matters and they can be available to you on short notice, it’s likely the arrangement will work. If there is no one who could serve, speak with your estate planning attorney about alternatives. For instance, making an adult child a successor trustee will let them step in if and when you are not able to manage your affairs, while you retain full and complete authority while you are still able to do so. The bottom line is this: Take care when naming a co-trustee. The last thing you want to do is jeopardize your legacy. If you would like to learn more about trusts, please visit our previous posts.
Reference: The Street (Oct. 11, 2022) “3 Things to Consider when Naming Co-Trustees”
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