Many clients desire that not only all of their children to be treated equally and but their desire that they are involved in decision making by making them all Co-Trustees. The “problem”, if it may be called such, is the balancing of your children’s personalities and your desire that all of them be equally involved in the management of the trust. One of the pitfalls of requiring that all of the trustees unanimously agree to all decisions is a potential for a deadlock. The three most common ways to avoid this deadlock are as follows:
1. Majority Consent as Apposed to Unanimous Consent. With this type of decision format, the trust could be established so that while one or both spouses are alive, they have complete control of the trust; however, upon the death or disability of one spouse, the other spouse-trustee, along with their children would then manage the trusts assets. If a decision were required to be made with regard to trust assets or distributions, it would take a majority vote of trustees in order to approve such action. The trust can be drafted so that while one spouse is still trustee, major decisions would require your affirmative vote along with only the majority of their children. Upon the second trustee’s death or disability, any decision made on behalf of the trust would require a simple majority vote in order to make decisions.
2. Separate Powers. Another alternative is to give each child a certain area over which to manage trust assets. For example, one daughter could be in charge of managing real estate within the trust, another responsible for managing the day to day affairs of the trust, and the third child responsible for managing the brokerage accounts of the trusts. Provisions would include a requirement that all of the individual trustees must submit quarterly reports to the other trustees to keep them apprised as to what happened to those assets during the quarter.
3. Corporate Trustee. The final option would be to place the trust’s assets or estate administration in the hands of a corporate trustee. By appointing a corporate trustee, one eliminates any potential disagreement or bruised egos as an independent third party would be responsible for managing the trust’s assets. In choosing a corporate trustee, you should look for someone who not only handles the investment assets of the trusts, but also assumes the personal matters as well, including paying bills, managing insurance claims, and arranging for the maintenance of your residence.
If you would like to explore some of these ideas, please feel free reach out to us.