When a grantor executes a trust, he is setting up a financial vehicle that will allow him to pass money and property to his heirs with a minimum of cost and delay after his death. The trust document must set out the authority of any co-trustees — the individuals responsible for managing the trust and distributing the assets. The most basic duty of a co-trustee is the responsible management of assets. Although the trust may instruct the trustee in how to do this, most trustees have fairly wide latitude to act, by opening and closing bank accounts, investing in stocks or other instruments, buying and selling property, and so on. A co-trustee must keep accurate records of this activity and also account for it to the beneficiaries.
A co-trustee must also deal with state and federal tax agencies. Trust assets may be subject to estate taxes as well as annual income taxes; a co-trustee must file returns, pay any taxes due out of the trust, and communicate with the IRS and state tax authority if necessary. To carry out this step, the co-trustee may hire the services of an accountant or tax lawyer. Co-trustees will also be responsible for paying any valid debts or legal claims against the trust.
A co-trustee may also be responsible for overseeing the distribution of trust assets to beneficiaries. The trust should spell out exactly how, and when, to distribute those assets and what purpose they should serve. In the case of a minor, for example, the distributions may be tied to education costs. Co-trustees must act cooperatively with other trustees and with their full knowledge and consent, unless the trust specifically provides for a single co-trustee to act alone in any matter.
The co-trustee acts in cooperation with the other trustees, unless the co-trustee named in the trust is a successor trustee or takes over the trust upon the death or incapacity of the original trustee. In the eyes of the law, the co-trustee has the same responsibility to manage the trust according to its instructions and in the best interest of the beneficiaries. If the co-trustee disagrees with an action by another co-trustee, he has the authority to object in writing to that action and, if necessary, submit a petition to prevent it in probate court. In most cases, such an objection will shield him from legal action and liability for any negative consequences.