If you have already created a revocable trust, congratulations—that means you have taken steps to protect the people important to you and eliminated concerns they may have about what will happen when you are gone. "Who should I name as a co-trustee?" is an important thing to consider in your estate planning. 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 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 tough 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 do not want to have them as a co-trustee. Not only will you disagree on how assets are to be used, but you may also find yourself in a situation where your assets are financing fun and wasteful spending, which is 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 are 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 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 is 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, this opens the door to your co-trustee being able to act unilaterally. If you are 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 agree on financial matters and they can be available to you on short notice, it is 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 when you are not able to manage your affairs, while you retain full and complete authority while you are still able to do so.
Another option that more clients are considering is choosing an independent trustee to serve as co-trustee or successor trustee. In our area, we have one local bank that still maintains a Trust Department and they do an excellent job! I am also a Master Certified Independent Trustee and am happy to serve when needed! Schedule a consult to learn more, and let's discuss what is best for your situation!
So, when pondering the question of "Who Should I Name as a Co-Trustee?", please know there is help available! If you or a loved one are concerned about issues with situations like this, and in estate planning and elder law concerns including Asset Protection/Medicaid Planning and questions regarding long-term care and the nursing home, reach out to us! Book a call with us on our website: www.VAElderLaw.com to get started. We have offices in Bassett, Danville and Lynchburg to serve you.
Reference: The Street (Oct. 11, 2022) “3 Things to Consider when Naming Co-Trustees”
