New York Estate Planning & Elder Law Blog
In the recent Texas of Marshall v. Marshall, a beneficiary initiated legal action against a trustee as well as five co-trustees of two trusts addressing claims that they had breached fiduciary duties. After the original lawsuit was filed in Texas, the trustee filed a petition seeking declaratory relief and requesting that the court declare the co-trustees were sufficiently appointed. The beneficiary obtained a temporary injunction preventing the co-trustees from receiving compensation as well as disposing of trust assets or participating in litigation.
The court of appeals reversed the litigation on the grounds that permitting the lawsuit to continue did not constitute a miscarriage of justice. The court of appeals also reversed other aspects of the temporary injunction on the grounds that there was no evidence to support that irreparable harm would occur otherwise.
The Role of Co-Trustees
A person who creates a trust might decide to appoint a co-trustee, which is an individual who shares responsibilities in overseeing a trust. Much like trustees, co-trustees must act in the best interest of the trust’s beneficiaries. While some trusts might assign co-trustees with complex duties, other trusts appoint co-trustees with only a few simple tasks to perform. A co-trustee can be anyone except a minor. Co-trustees must agree with other co-trustees whenever making decisions about a trust provided the trust agreement does not contain terms permitting one co-trustee to act independently. When disagreements occur among co-trustees, it’s common for them to proceed to court and request the court make a decision.
Critical Considerations when Appointing a Co-Trustee
If you’ve decided that a co-trustee would play an excellent role in your trust, there are some important issues that you should consider before appointing one, which includes:
- Hopefully, your co-trustee will get along and not get into disagreements with one another. This, however, is not always the case. You should consider what would happen if your co-trustees are not capable of reaching a decision peacefully. Remember, you can place language in your trust that controls how disagreements will be decided. If you fail to address this possibility, however, the disagreement could lead to particularly complex situations.
- If you appoint a person as co-trustee and they are not prepared to serve in this capacity, you have the option to say no and the position will pass to your next choice. However, once a person accepts the position of co-trustee, that individual is empowered to act in the best interest of the trust. It’s not unheard of for people to take the job of co-trustee and then not fulfill their duty. It’s also a good idea to state what your expectations of a co-trustee are in a trust as well as what should be done if a co-trustee fails to uphold their duty.
Obtain the Assistance of an Estate Planning Attorney
The estate planning process is full of challenges, but a knowledgeable attorney can help you achieve your goals. Contact Ettinger Law Firm today to schedule a free consultation.