Who Do You Trust? Selecting an Executor or Trustee - A Primer
by James V. Quillinan, Attorney at Law
The Letitia Building
70 South First Street
San Jose, California 95113-2406

Multiple Fiduciaries

You may appoint as many individuals or corporations as you desire to serve as executors or trustees. Of course, "[a] plethora of fiduciaries [is] a mistake, for too many will clutter up the administration of the estate or trust."

Potential benefits.

When more than one fiduciary is currently serving, the trust or estate benefits from the experience and expertise of several persons. Better decisions may result because of the deliberation that occurs when the co-fiduciaries present multiple viewpoints.

Multiple fiduciaries also give you a greater chance of achieving continuity in management, an important consideration if the trust is expected to last for a long time, such as a dynasty trust or a charitable trust. The settlor can provide in the trust instrument that when, for whatever reason, any trustee no longer is serving, the remaining trustees are authorized to select a replacement. This self-perpetuation is likely to result in replacement trustees who share the settlor's philosophy, understand the settlor's goals and have the appropriate experience and expertise.

Multiple fiduciaries also provide greater protection to the estate and beneficiaries. There are built in checks and balances because each fiduciary should evaluate the conduct of the other fiduciaries.

Appointing multiple fiduciaries is one way of resolving the debate between appointing a corporate or an individual trustee. You can obtain the benefits of both individual and corporate fiduciaries by naming one of each. The individual would supply the personal touch and insight that the corporate trustee might lack, and the corporate institution could provide the fiduciary expertise. This approach, however, must be used with care. An individual co-trustee can make the operation of the trust more inefficient if both trustees must agree before many actions can be taken. Often the individual co-trustee's consent is hard to obtain, because the individual is unavailable, is ill, or simply is unresponsive. Your appointment of multiple fiduciaries may increase the likelihood that the designated persons will agree to serve. The duties and responsibilities of administration are spread among several persons, thus reducing the burden on any one fiduciary.

The appointment of multiple trustees may be a good technique to save expenses when the trust is a life insurance trust. Corporate trustees are beginning to realize that their exposure to potential liability for managing these trusts may be significantly higher than they originally anticipated. They may have a duty to monitor the financial condition of the insurer and take appropriate steps at the first sign of trouble. Likewise, the trustee may have a duty redeem a high cash-value insurance policy and make more aggressive investments. Thus, corporate trustees are less willing to serve as trustees of life insurance trusts and those that do serve are more likely to charge. This problem may be solved by the selecting an individual trustee to serve without compensation during the settlor's life, with a corporate fiduciary taking over upon the settlor's death. The corporate trustee thus avoids potential liability during the settlor's life but yet is available to manage the proceeds when the settlor dies.