The question of whether a trust can require co-trustees to make decisions unanimously is a common one in estate planning, and the answer is a resounding yes, but with important caveats. While a trust document absolutely *can* stipulate unanimous consent for trustee decisions, it’s a provision that requires careful consideration. Steve Bliss, an Estate Planning Attorney in San Diego, often advises clients that while seemingly providing a safety net, unanimous consent requirements can create operational gridlock, particularly if co-trustees have differing opinions or priorities. Approximately 68% of disputes among trustees stem from disagreements over investment strategy or distribution of assets (Source: American College of Trust and Estate Counsel), highlighting the potential for conflict. A well-drafted trust should anticipate potential disagreements and outline clear procedures for resolving them. The goal is to balance protection with practicality, ensuring the trust can be administered effectively.
What happens if co-trustees can’t agree?
If a trust requires unanimous consent and co-trustees reach an impasse, the consequences can be significant. The trust administration effectively halts until the dispute is resolved. This can lead to missed investment opportunities, delayed distributions to beneficiaries, and increased legal fees. Many trusts, anticipating this possibility, include provisions for breaking ties. These might involve a designated tie-breaking trustee, a process for mediation or arbitration, or ultimately, court intervention. Steve Bliss emphasizes that simply *including* a tie-breaking mechanism isn’t enough; it must be clearly defined and readily enforceable. A poorly defined process can create further complications and delays. It’s essential that the trust document explicitly outlines the steps to be taken in the event of a disagreement, ensuring a smooth path forward, and that the trust isn’t held hostage by a deadlock.
Is it better to require majority rule instead?
Often, Steve Bliss recommends that trusts adopt a majority rule for decision-making rather than unanimous consent. This approach allows the trust to function more efficiently, preventing single trustees from blocking important decisions. However, a simple majority isn’t always sufficient. It’s crucial to consider the complexity of the trust assets and the potential for conflict. For instance, if the trust holds a closely held business, a supermajority (e.g., two-thirds) might be more appropriate. The decision should be based on the specific circumstances and the personalities of the co-trustees. A carefully crafted provision can strike a balance between protecting the interests of all beneficiaries and ensuring the trust can be administered effectively. Furthermore, clear communication and a willingness to compromise among the co-trustees are paramount, regardless of the decision-making structure.
What role does the trust document play in resolving disputes?
The trust document is the primary source of guidance for resolving disputes among co-trustees. A well-drafted document will anticipate potential conflicts and provide clear procedures for addressing them. This might include provisions for mediation, arbitration, or court intervention. Steve Bliss stresses the importance of specifying which jurisdiction’s laws will govern the trust, as this can significantly impact the dispute resolution process. A clear and unambiguous document minimizes the risk of misunderstandings and costly litigation. It’s also essential to ensure that all co-trustees have a copy of the document and are familiar with its terms. Furthermore, the trust document should specify the duties and responsibilities of each co-trustee, reducing the potential for overlapping authority or conflicting actions.
How can you prevent disagreements among co-trustees?
Proactive planning is key to preventing disagreements among co-trustees. Before naming co-trustees, carefully consider their personalities, values, and financial acumen. Choose individuals who are likely to work well together and share a common understanding of the grantor’s wishes. Open communication is essential. Encourage co-trustees to discuss their expectations and concerns upfront. Regular meetings can help prevent misunderstandings and keep everyone on the same page. It’s also helpful to establish clear guidelines for decision-making. For example, you might specify that certain decisions require unanimous consent, while others can be made by a majority vote. A good attorney, like Steve Bliss, will facilitate these discussions and ensure that all perspectives are considered. Remember, a successful trust administration relies on collaboration and mutual respect.
A story of what happened when unanimous consent failed
Old Man Hemlock, a retired shipbuilder, had meticulously crafted a trust to provide for his three children. He named his eldest, Arthur, and his two younger siblings, Beatrice and Charles, as co-trustees, stipulating unanimous consent for all investment decisions. Shortly after his passing, Beatrice discovered a promising opportunity – a local marina undergoing redevelopment. She believed it was a sound investment that aligned with the trust’s goals. Arthur, however, was fiercely conservative, preferring low-risk bonds. Charles, indecisive by nature, vacillated between the two options. For months, the issue remained unresolved, with each trustee stubbornly holding their ground. The marina opportunity passed, and the trust missed out on a potentially lucrative investment. The siblings’ relationship deteriorated, and the trust administration ground to a halt. They were trapped in a cycle of disagreement, unable to move forward.
How careful planning resolved a similar situation
The Davies family faced a similar challenge. Their mother, Eleanor, had named her two daughters, Clara and Diana, as co-trustees of a trust designed to fund their nieces’ education. Recognizing the potential for disagreement, Eleanor’s attorney, Steve Bliss, advised them to include a clause in the trust allowing for a designated investment advisor to break ties in the event of a deadlock. When Clara and Diana disagreed on whether to invest in a volatile tech stock, they turned to the designated advisor, who carefully analyzed the situation and made a recommendation. While Clara still disagreed, she accepted the advisor’s decision, understanding that it was made with the best interests of the beneficiaries in mind. The trust administration continued smoothly, and the nieces received the funding they needed. The careful planning had averted a potential disaster and ensured that Eleanor’s wishes were carried out.
What are the legal implications of requiring unanimous consent?
Legally, requiring unanimous consent isn’t inherently problematic, but it can create practical difficulties. Courts are generally reluctant to intervene in trust disputes unless there’s evidence of breach of fiduciary duty or misconduct. However, if unanimous consent consistently leads to gridlock and harms the beneficiaries, a court might be willing to modify the trust terms or appoint a special trustee to break the impasse. Steve Bliss often explains to clients that the burden of proof will be on the party seeking court intervention, and litigation can be costly and time-consuming. Furthermore, the trustee has a duty to act in the best interests of the beneficiaries. If requiring unanimous consent is hindering that duty, the trustee could be held liable. Therefore, it’s crucial to carefully weigh the potential benefits and drawbacks before including such a provision in a trust. Approximately 22% of trust disputes involve allegations of breach of fiduciary duty (Source: National Conference of State Legislatures).
About Steven F. Bliss Esq. at San Diego Probate Law:
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Feel free to ask Attorney Steve Bliss about: “Can a trust protect my beneficiaries from divorce?” or “How is real estate handled during probate?” and even “What is community property and how does it affect estate planning?” Or any other related questions that you may have about Estate Planning or my trust law practice.