Advisor Flipbooks

Co-Trustees More than one individual or corporation can serve as co- trustees. The trust can benefit from the experience and expertise of several persons or entities. Better decisions may result because of the deliberation that occurs when the co-trustees present and discuss multiple viewpoints. Multiple trustees, including a corporate trustee, also provide a greater chance of achieving continuity in management, an important consideration if the trust is expected to last for a long time. Appointing multiple trustees is one way of resolving the debate between appointing a corporate or an individual trustee. The individual would supply the personal touch and insight that the corporate trustee might lack, and the corporate trustee could provide the fiduciary expertise. This approach, however, must be used with care. Often the individual co-trustee's consent is difficult to obtain because the individual is unavailable, perhaps due to illness, or simply is unresponsive. There is the potential of deadlock and paralysis in a tie vote if an even number of trustees is serving. A costly judicial resolution would then be needed. This problem can be avoided by (1) appointing an odd number of trustees or (2) providing a method of resolving tie votes in the governing instrument. Multiple trustees can result in additional fees and/or expenses because of the extra conferences, telephone calls and paperwork required. Some corporate trustees may charge a higher fee if a co-trustee is an individual because of the additional time that it usually takes to work with an individual co-trustee. An individual or corporation may be reluctant to serve with other trustees for fear of personal liability for the acts of the other trustees. Normally, each co-trustee is jointly and severally liable for the acts of all trustees. Special Trustees Instead of multiple trustees, a "special" trustee, trust protector or advisory committee can be established to have responsibility for a specific function of the trust. The special trustee is often used to invest the trust fund, to run a closely-held business, handle other specialized assets, advise the trustee about appropriate distributions to beneficiaries, or to remove a trustee and appoint another one. Successor Trustees You should always name alternate or successor trustees in case your first choice is unable or unwilling to serve. You may also specify methodology for selecting a successor trustee in your governing documents. If there are no alternates and no selection method defined, court action will usually be necessary to fill the vacancy. Trust Investment Management Many states have enacted the Uniform Prudent Investor Act that reforms the standard of care applicable to trust investment and management. Under this Act trustees are bound to consider the purposes, terms, distribution requirements and other circumstances of the trust. The trustee's decisions regarding individual assets are no longer evaluated in isolation, one investment at a time, but rather are examined in the context of the trust portfolio as a whole and as a part of an overall investment strategy with risk and return objectives that are reasonably suited to the particular trust. The trustee is authorized to consider a wide range of factors, including: › General economic conditions › Potential inflation and deflation › Tax consequences › The ramification of each investment on the entire portfolio › Anticipated income and appreciation › Trust beneficiaries other resources › The need for liquidity, income or appreciation › Any special relationship that an asset has to the purposes of the trust or to a beneficiary (e.g., real estate or heirlooms that have been in the family for generations). 4

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