Trusts are an important part of estate planning. They can also be one of the trickier aspects of estate planning. It doesn't have to do with setting up a trust and naming trust beneficiaries. It has everything to do with naming successor co-trustees, specifically naming more than one of your children. Your trust attorney in Orange County will give you good advice about the decision, but there are some factors you should know from the outset.
Family dynamics are interesting. Families can put up a joint front when you don't expect it and fall prey to in-fighting also when you least expect it. The point is, you might expect your children to act cohesively as co-trustees, but when it comes right down to it, your decision could drive a wedge between them.
This is the question that drives many people to name all their children as co-trustees.
They might think you're choosing your favorite child. They might feel hurt because you chose one over the others. They might even feel that it's unfair for one of them to make all the important decisions without consulting the others.
It seems like the only logical thing to do is to include everyone. However, it turns out that it could actually be the worst thing to do.
For starters, being a trustee is a big responsibility. They have to make important decisions about the trust; decisions that require calm, logical thinking. Ask yourself if your children, working as a committee, are capable of calm, rational thought that leads to unanimous action.
Unanimous is the key word here, as your Orange County estate planning attorney will tell you.
According to the Californian Probate Code, multiple trustees must all agree on the matter at hand. There's no majority rule. There's no veto power. Everyone must be in complete agreement.
Does this sound like your family? After all, even the closest siblings will occasionally disagree.
You'll need to create contingencies for situations when there is a stalemate; for example, have a corporate trustee (from a bank or trust company) break the deadlock. Note: The corporate trustee has no right to interfere if your children are in agreement.
Unanimity is just one potential obstacle. There are several more that must be overcome.
If one of your children feels that any of the others are lax in their duties as trustees they have the option to petition the court to either resolve the problem or remove the lackadaisical sibling. This is an expensive process that is billed to the trust.
Not only is the value of the trust reduced but the relationship between your adult children could suffer.
Without instructions otherwise, all co-trustees must sign legal documents, including those that authorize particular actions. Often, they have to sign the trust documents in the presence of others to ensure they are all of one mind. This is obviously a problem if your children are scattered across the country.
You can work around the problem by specifically stating that the signature of Trustee A will suffice. This works well in theory, but it poses the exact same problem that naming all your children joint trustees was supposed to prevent. One sibling has the power and, in this instance, can act without support from the others.
In the event that your children have reached an agreement, and you haven't designated a "head trustee" who can sign on behalf of everyone, the documents must be signed by all of the trustees. In some cases, signing can be witnessed by authorized professionals, like an attorney or certified bank employee.
Should this not be the case, all siblings will have to get together at the same time to sign the documents. This can take some time and some complex arrangements, which basically means that it can take months before any decisions are acted upon.
If you name all your children as co-trustees, you bind them in ways you might not expect. If one child has sticky fingers and helps themselves to some of the assets or funds in the trust, they breach their fiduciary duty. Unfortunately, all of your other children are jointly liable. They could all face legal action for their sibling's crimes.
No, it doesn't. If you really want to involve all of your children - including those from a blended family—the best thing to do is talk to all of them. Talk to them privately and then, if possible, in a group. Modern technology means that you can have a group meeting via live streaming platforms, like Zoom and Google Chat. So there aren't really any excuses for not being able to attend.
The first conversation that you should have is with your head trustee. They must be willing to assume the role and all the concomitant responsibilities. If not, you need to talk to your second choice.
You also need to talk to others to explain the reasoning behind your decision. For example, Daughter C has excellent managerial and organizational skills and that's why you've chosen her as head trustee. Then explain the importance of their supporting role so they don't feel marginalized.
You can use an impartial, independent trustee. Many banks have professional trustees who work in the trust department. They know all the rules and procedures and work quickly and efficiently so there aren't any unnecessary delays when certain actions or steps need to be taken.
There are also private professional trustees or fiduciaries who can manage your trust. Before you sign any contracts, however, make sure they are properly licensed and bonded by the state of California.
Estate planning lawyers are there to give you valuable advice about optimizing your legacy, including setting up trusts to protect your assets from probate. Your probate attorney in Orange County can help you decide what types of trusts you can create, as well as help you choose a suitable successor trustee.
Parker Law Offices specializes in estate planning with a focus on trusts. If you have any questions about starting estate planning or want to add a trust to an existing estate plan, simply contact Parker Law Offices via email, the contact form on their website, or call 949-867-4818.