Help! My Bank Won't Recognize Co-Trustees
Published: Fri, 06/12/15
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Help! My Bank Won't Recognize Co-TrusteesIf you cannot view the image below, please read the article on our blog. Q. My mother named me and my brother as co-trustees of her Revocable Living Trust. She passed away earlier this year in her home town of Abingdon, VA (near the Tennessee border), where my brother still resides. Since then, when it comes to managing the trust, we have had nothing but trouble with the bank. When I walked into Wells Fargo, I was told that a Trust Certification would have to be signed and notarized with both my brother and me in front of a notary at the same time. If we absolutely have to arrange that, I suppose we could, but it would be a considerable hassle because he lives nearly six hours away. I was hoping that I could sign any documents before a notary here and then mail the original to him to sign there, but Wells Fargo says this isn't possible. Maybe it's just Wells Fargo being particularly careful, but they made it sound like any notarized document that has to be signed by co-trustees inherently requires both people to show up together. I have also heard in other instances that some banks don't recognize co-trustees acting jointly at all. When I do my own trust and want to name both my children as co-trustees, can this same situation somehow be avoided? ----- A. Some trust creators (called Grantors or Settlors), such as your mother, have two children (or two people) they trust enough to make successor co-trustees of their trust. This puts both people in charge of the trust simultaneously. A trust (and other legal documents such as a Power of Attorney), may allow successor co-trustees to act in concert and exercise their powers jointly, or it may be written to allow either co-trustee to act independently. Family members may be excellent candidates to serve as co-trustees or successor trustees when a Grantor is alive. But the job is entirely different after the death of both grantors (or the sole grantor in the case of an single person trust). Below are three common problems that are sometimes faced, including the issue you described with the bank: Banks not accepting co-trustees More and more financial institutions (banks, credit unions, etc.) will not recognize the authority of co-trustees who must act jointly. Instead, they require that the document designating co-trustees provide that each of the co-trustees may act independently of each other, because the bank does not want to be in the position of having to police the actions of the trustees; rather, the bank, for its own protection, wants to be able to honor any action taken by either trustee. In many cases, unfortunately, if the Grantor is deceased or incapacitated and the trust does not state that co-trustees can act independently, the co-trustees may be powerless to act on the account without legal action to amend the Trust or signing some agreement with the bank and contravenes the explicit terms of the trust. Co-Trustees Acting Independently Because of this growing problem, we are now recommending that trusts naming co-trustees state that the co-trustees can act independently (i.e., act alone and without both signatures). Even then, some banks make the assumption that both trustees must always sign everything, and sometimes extreme measures are necessary to get a bank to understand that this is not how the trust is written. The trustees for one of our clients (as you can see from the photo above) actually got custom T-shirts made stating that they are “Co-Trustees, Acting Independently,” and they now wear these every time they go to the bank! Co-Trustee Logistical Problems: Another common problem associated with co-trustees is if the two trustees have to act jointly with each other, meaning they need to sign deeds, checks, and other financial documents together. This can slow down the process, especially if one or both trustees do not live near one another or are not communicating with each other. This can also slow down or cause problems when one trustee goes out of town for vacation, is incapacitated, etc. Co-Trustee Disagreements Another issue with co-trustees is what happens if there is a disagreement between them about the administration of the trust. It is amazing how much family strife can occur when the matriarch or patriarch of the family passes away. If co-trustees are assigned equal authority and do not trust one another, do not get along, or just do not agree with the decision of the other co-trustee, it may require court intervention to break the disagreement (and most likely remove one or both the trustees to avoid further disagreements), and that can get very costly. Trust Administration Another way to avoid common co-trustee problems is to name a trust administrating institution, such as a professional trust company, a trust department of a bank, or a law firm, as the trustee, with children or other beneficiaries as Trust Protectors who can remove and replace the professional trustee at any time. For example, the Farr Law Firm is available to serve as Trustee or Successor Trustee of a Living Trust, and/or Executor of a Will and/or Agent under a Power of Attorney. We of course charge a minimum annual fee, and our firm is very selective in the clients we choose to offer this service to. Feel free to contact us via our Contact Form if you would like a copy of our Fiduciary Fee Schedule and Disclosure, which explains in detail our fiduciary fees and services, and also explains that you should consider and investigate all of the alternatives available to you before deciding whom to select as Trustee and/or Executor and/or Agent under a General Power of Attorney. Estate Planning One of the best ways to avoid issues with co-trustees and banks is to talk to a Certified Elder Law Attorney, such as myself, who will ensure your trust is written and executed correctly. To begin your Estate Planning or to update your existing documents, please contact us. Fairfax Estate Planning: 703-691-1888 Fredericksburg Estate Planning: 540-479-1435 Rockville Estate Planning: 301-519-8041 DC Estate Planning: 202-587-2797 --------- Critter Corner: What are a Trustee's Responsibilities?  Dear Angel, My mother, Alice, asked me to be the successor trustee for her Revocable Living Trust. Before I accept the responsibility, I want to know more about what it entails. Do you know about the duties of a trustee and can you briefly describe them? Thanks! Watson Volved ---- Dear Watson, Having been asked to be the trustee of your mother's trust is a strong vote of confidence about your judgment. Keep in mind, however, that it is a major responsibility. The following is a brief overview of a trustee's duties: 1. Fiduciary Responsibility. Fiduciary duty is a legal responsibility to act solely in another party's best interests. By accepting fiduciary responsibility, a trustee may not profit in his or her role, unless the trustee has express informed consent, and must avoid any conflicts of interest. 2. Abiding by the Trust's Terms. The written trust document is the trustee's roadmap, and he or she must follow its directions, whether about when and how to distribute income and principal, or what reports need to be made to beneficiaries. 3. Investment Standards. With a revocable living trust, a trustee's investments must generally be prudent, and not speculative or risky, and they must take into account the interests of both current and future beneficiaries. 4. Distributions. Where a trustee has discretion as to whether or not to make distributions to a beneficiary, he or she must take into account the size of the trust, and will need to evaluate the beneficiary's current and future needs and other sources of income, and responsibilities to other beneficiaries before making a decision. 5. Reporting. A trustee's job also involves keeping track of principal, income, distributions, and expenditures by the trust. He or she should check the terms of the trust to know how often he or she must report this information to the beneficiaries. 6. Taxes. The trustee will have to file an annual tax return and may have to pay taxes on behalf of the trust. 7. Delegation. While a trustee typically cannot delegate his or her responsibility as trustee, he or she can delegate all of the functions described above. He or she can hire financial advisors to make investments, accountants to handle taxes and bookkeeping for the trust, and an experienced Elder Law attorney to advise on questions of interpretation. 8. Fees. Trustees are entitled to reasonable fees for their services. Family members often do not take fees, though that can depend on the work involved in a particular case, the relationship of the family member, and whether the family member trustee has been chosen due to his or her professional expertise. Acting as trustee can be gratifying, but as you can see from the responsibilities described above, it can be a lot of hard work, so be sure to think it through carefully before accepting the role. However, keep in mind that being the successor trustee of a Revocable Living Trust is a thousand times simpler than being the Executor of a Will (see our recent blog post about the difficulties of being an Executor). Best of luck, Angel |
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