One major advantage to having a revocable living trust is being able to name a Co-Trustee. This possibility allows someone to appoint someone to be in the wings and able to step in immediately and seamlessly to pay bills and manage assets.
If you’ve already created a revocable trust, congratulations—that means you’ve taken steps to protect the people important to you and eliminated their concerns about what will happen when you’re gone. 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 relatively straightforward idea: letting them serve alongside you by being named co-trustees.
I have spoken to many children who call to take over a revocable trust when the trust creator now has significant memory issues. If they are a successor trustee, I give them forms and ask them to have two doctors certify that they cannot serve. Children always say they don’t want to do that. Neither would I. Appointing them as Co-Trustee removes this requirement.
This might make sense. However, it may not. You need to ask some hard questions. Will they take off to Tahiti with all your assets?
First, are you and your adult child in alignment on financial matters? If you are conservative regarding money and investing, but your child is a free-wheeling, come-what-may person, you should not be ready to name 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 funding a lot of fun, which is likely 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’re firing one child and replacing them with another child, could lead to much 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’s an issue processing something, and the bank will not accept a document sent by email or fax but requires an in-person signature? It can be cumbersome to add them to accounts.
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’re 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 must change their estate plan to be fair to their other children. Sometimes they feel that another child should be named a Power of Attorney or Health Care Power of Attorney. Dividing these roles merely to smooth over feelings is a bad idea. If you want to name a Co-Trustee, that same person should probably also be the executor and person appointed under a power of attorney for finances.
“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 must fulfill 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, having your estate planning attorney help you name a co-trustee arrangement between you and an adult child is possible. If they live close by, you mainly agree on financial matters, and they can be available to you on short notice, the arrangement will likely work. If there is no one who could serve, speak with your estate planning attorney about alternatives. For instance, making an adult child the successor trustee will let them step in if and when you cannot manage your affairs, while you retain full and complete authority while you are still able to do so.
Reference: The Street (Oct. 11, 2022) “3 Things to Consider when Naming Co-Trustees”
Suggested Key Terms: Trustee, Estate Planning Attorney, Power of Attorney, Revocable Living Trust, Assets