What Are Co-Trustee Powers?

By Stephanie Kurose, J.D.

What Are Co-Trustee Powers?

By Stephanie Kurose, J.D.

A trust is a legal document that governs how the grantor's assets pass to the named beneficiaries upon the grantor's death. When a grantor establishes a trust, a single trustee manages the trust's assets on behalf of the named beneficiaries. However, there is no requirement for a trust to have only one trustee. When a grantor names multiple trustees, or co-trustees, they are responsible for co-managing the trust's assets.

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Cooperation of Co-Trustees

It is important to know what and how much power each co-trustee has over the management of the trust's assets. First and foremost, every trustee has the responsibility of abiding by the trust's instructions and acting in the best interest of the beneficiaries. In addition, co-trustees must generally act cooperatively with each other, unless the trust explicitly grants certain duties to a single trustee. This means that each co-trustee must act with the full consent and knowledge of the other co-trustees.

The trust should explicitly state the authority of the co-trustees. If a co-trustee does not agree with another co-trustee's action or decision, they have the authority to object in writing and, if necessary, submit a petition in probate court to try to prevent it. Submitting a petition generally shields the objecting co-trustee from any legal liability should any negative consequence result from the original action or decision.

Power to Manage the Trust's Assets

One of the fundamental duties of a trustee is to manage the grantor's assets responsibly for the beneficiaries. The trust may explicitly dictate how to do this, but, most of the time, trustees have fairly broad discretion to manage the assets as they see fit. For example, a trustee can buy and sell property, invest in certain stocks, and open or close bank accounts. However, a trustee must record and notify the beneficiaries of every management action taken.

Filing Applicable Taxes

Another responsibility of a co-trustee is to arrange for the payment of any taxes owed by the assets in the trust. For example, certain assets held in trust may be subject to estate taxes as well as income taxes. It is the duty of a co-trustee to file tax returns with the Internal Revenue Service (IRS) and state tax agency, if necessary, and pay any taxes due out of the trust. Co-trustees are also responsible for paying any legal debts or claims against the trust and have the authority to hire a tax attorney or accountant to carry out these duties.

Overseeing the Trust's Distribution

A living trust should clearly describe which assets the trustee should distribute to which beneficiaries and how and when to distribute those assets. For example, the distribution does not necessarily have to happen immediately upon the grantor's death. Instead, the distribution could follow some other event, such as when the beneficiary turns 18.

As a general matter, if a grantor names multiple trustees to manage the living trust, they are all responsible for properly distributing the grantor's assets according to the trust's instructions.

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