When you create an estate plan with a Will, a Trust, or both, one of the first questions your attorney will ask is, “Who do you want to serve as your executor and trustee?” (collectively, “fiduciaries”).
Several names may come to mind, prompting a follow-up question: should you name them as successive alternates, or appoint two people to serve together as co-executors or co-trustees?
Choosing an executor for your Will or a trustee for your Trust is one of the most important decisions in the estate planning process. This person is responsible for administering your estate or overseeing your financial affairs – a multifaceted role that often requires asset management, banking, tax filing, and even family counseling. Even for “simple” wills or trusts, the job is no small task. (See So, You’re a Trustee…Now What Do You Do?)
To spread the workload, appointing multiple executors or trustees may seem appealing – two is better than one, right? Not necessarily. Naming co-fiduciaries can create unexpected conflict and administrative burden that outweigh the benefits.
Before deciding whether to appoint co-fiduciaries, it’s important to understand what each role entails, weigh the pros and cons, and consider the alternatives.
Executors and Trustees: Roles Defined
The duties of executors and trustees arise under the terms of your estate planning documents and under North Carolina law.
An executor (also called a “personal representative”) is the person named in a will to administer an estate after death. Key obligations include:
- Preparing inventories and accountings for auditing by the court.
- Protecting assets and making decisions in the best interests of the estate and beneficiaries.
- Paying administrative expenses, debts, outstanding creditor claims, and filing tax returns.
- Making final distributions to beneficiaries as directed by the will.
A trustee is the person named in a trust agreement to manage assets that the trust creator (the “Grantor”) transfers into that trust during the lifetime of the Grantor or that pass to the trust by will or beneficiary designation after death. Key obligations include:
- Administering the trust in good faith and according to its purpose.
- Acting in the best interests of beneficiaries with impartiality and loyalty.
- Investing and managing trust assets prudently while balancing the needs of the trust.
- Providing adequate records and information to the named beneficiaries. (This duty is often a significant source of conflict!)
- Managing bank accounts and investments, paying bills, and filing required North Carolina and federal tax returns.
- Making final distributions to beneficiaries as directed by the trust provisions.
Pros of Multiples
Given the above lists of responsibilities, selecting co-executors or co-trustees may seem attractive. The advantages include:
- Shared Workload: Naming two individuals can spread out responsibility according to complementary skill sets of the fiduciaries. It can also provide an uninterrupted flow of duties if one person is unable to serve.
- Checks and Balances: You may desire multiple fiduciaries to ensure obligations are satisfied and your intentions are carried out.
- Family Representation: Some families name co-fiduciaries to allow for equal family representation. This can help ensure that beneficiaries are represented and there are equal safeguards for trust assets.
Cons of Multiples
Although spreading the workload may sound appealing, shared fiduciary responsibilities can introduce significant challenges:
- Conflict: When you appoint multiple fiduciaries, decisions must generally be made unanimously unless the will or trust provides otherwise. This can cause disputes regarding asset valuation, disposal, distribution methods, or investment strategy.
- Administrative Burden: Multiple fiduciaries can create logistical headaches. Many banks and courts require each fiduciary to sign documents, and some require wet signatures. This can cause administrative headache or missed deadlines. Out-of-state fiduciaries must also designate a North Carolina process agent to receive legal process and correspondence.
Alternatives
Many of the advantages of co-fiduciaries can be achieved through other estate planning tools:
- Outsourcing: One of the best alternatives to co-fiduciaries is outsourcing specific responsibilities. CPAs can assist with estate and trust tax filings, and law firms like Ward and Smith frequently provide estate administration services to help executors navigate the settlement process.
- Successive Alternates: It is always advisable to name multiple successive alternate executors and trustees in your estate planning documents. If your first choice is unable or unwilling to serve, your preferences remain intact without the complications of co-fiduciaries.
- Corporate Trustee: A corporate trustee (such as a bank or trust company) is a good option for individuals who lack a trusted person to serve or who want professional asset management. The drawback is that many institutions require a minimum portfolio size before accepting a trusteeship.
- Co-Trustee Service and Removal: For trusts benefiting children or grandchildren, a common approach is to name the beneficiary alongside an older relative or corporate trustee as co-trustee of their trust, with the option for the beneficiary to remove the co-trustee and become sole trustee at a specified age. This provides guardrails for younger beneficiaries while allowing independent management as they mature.
The Bottom Line
There is no right or wrong answer to naming co-fiduciaries, but it is a decision that deserves careful thought. The administrative burdens and potential for conflict often outweigh the perceived benefits of shared responsibility. In most cases, a single, well-chosen fiduciary, supported by successive alternates and professional advisors, will result in a smoother, more efficient administration.
Every family’s nningsituation is different. If you are considering your options, an experienced estate planning attorney can help you determine the right structure for your goals. Ward and Smith’s Estate Planning team is here to help.
