When Siblings Act as Co-Trustees: Potential Pitfalls in Estate Planning

We’ve all seen families fall apart. Siblings stop talking with each other. A son or a daughter cuts a parent out of his or her life. Obviously, the reasons for such breakups vary. But in my experience the number one divider is money. The best way I know to prevent family feuds over assets is to create an estate plan that works, and to avoid potential pitfalls in the process. Here’s one such hazard: When people with children set up their estate plan they often feel that they should treat them all equally by naming them all as co-trustees. Sounds fair and just? On the face of it, yes. But as an experienced estate planning attorney I invariably find myself cautioning these parents.

Problems almost certainly will arise whenever siblings act as co-trustees. The challenges begin with hassles such as having to co-sign bank, mortgage and escrow documents relating to the trust. (This may be no more than a minor inconvenience in some cases. But if the siblings live more than a couple of hours apart it can turn into a logistical nightmare.) They can include differences over which CPA or real estate agent to use, and squabbles about the amount of hours each trustee is putting into the administration of the trust.

Unfortunately, these issues, trivial though some of them may seem, often end in litigation and family fallouts. The California Probate Code (in Section 16013) clearly stipulates the obligations of each trustee in a situation where co-trustees exist. Each one must “participate in the administration of the trust.” And each must “take reasonable steps to prevent a co-trustee from committing a breach of trust.”

Reasonable steps? In the end, the only way to prevent an impending breach from happening is via a court order. And once siblings face each other before a judge all family bonds are usually severed.

So back to square one. What should parents with two or more children do? How can they still be fair toward them all? Well, the appointment of a trustee is not about fairness. The goal here is to find the person who will do the best job. That is usually someone who knows how to work under rules and regulations, someone who is organized and detail-oriented.

If “favoring” one offspring over another as trustee would lead to severe tension among siblings, it is probably best to name a third party as the trustee. As for treating all children equally – every legacy and every estate plan provide for ample opportunity to ensure that each sibling receives his or her fair share.

By Kevin J. Moore

Kevin Moore, Founder of Kevin J. Moore & Associates, is focused in the areas of estate planning, trusts and probate services with additional expertise in both domestic and international business transactions and tax planning and tax controversy representation for individuals and companies.