General trust questions

[JimPeters]

1. If a living trust has been set up with one successor trustee, is it acceptable to amend the trust to designate someone else as a second trustee of one particular property which was already in the trust?

2. When there is a no contest clause, which disinherits any beneficiary who contests the trust, can the successor trustee contest the trust with impunity (as trustee) if he is also a beneficiary?

 

[tranquility]

1. No.
2. No.

 

[TrustUser]

here is my take. i am curious as to what anyone else thinks, as i am always interested to continue to make myself more knowledgeable.

1) you can certainly have multiple trustees. there can be quite a few reasons for this. one, you might simply want your beneficiaries to have equal control of things. two, there could be too many assets for any one person to competently manage. three, you could have one person who is a whiz at real estate rentals, and another one is a whiz at dealing with securities, etc.

if it were me, and i wanted multiple trustees listed on my trust document, i would place them as successor trustees on the actual assets. the banks and credit unions in my area have all wanted me to place the successor trustee on the actual account. if it is real estate, another person could be added on to the title, as trustee. dad, trustee of the abc trust hereby grants to dad, trustee, and daughter, trustee of the abc trust.

2) i am of the understanding that only a person who has some sort of financial interest in the outcome can contest. which basically means anyone who is listed in the trust as a beneficiary, and perhaps those people who would naturally have inherited the property had the trustor died without a trust or will. simply being the trustee - i dont think gives any grounds at all. and i also think you have to have some sort of grounds such as fraud, or undue influence, etc. you cant just simply say i am unhappy cuz my sister got more than me. you would have to prove that your sister had undue influence on your dad, etc.

 

[tranquility]

you can certainly have multiple trustees.

Agreed, but that was not the question.

designate someone else as a second trustee of one particular property which was already in the trust

See how words matter? Your answer would mislead the OP into thinking he can do his plan. One trust with different trustees handling different assets in the trust. That's not the way it works.

1. No.
2. No.

 

[TrustUser]

hi tranquility,

it is still my opinion that you can have multiple trustees managing different properties.

i want joe smith to manage the apartment building in boston, as well as all other rental properties.

paula jones is to manage the stocks with verizon, and any other stock holdings that the trust manages.

etc.

a good rule of thumb is that if one can put it in writing, that it can be done that way, AS LONG AS IT IS NOT ILLEGAL.

i purposely did not answer the question exactly as asked, because i did not want to get into the discussion of "how to amend the trust".

i am always open to being proven incorrect. and will certainly listen to anyone else share his experiences. it is in the sharing of experiences that we can become more knowledgeable.

it is also why i did not just give yes, no answers. i wanted to bring some detail to light, so that others could agree or disagree, with some sort of understanding as to why i answered the way i did.

 

[JimPeters]

Thank you for these views.

Considering the two of you have different opinions on the question of multiple trustees within a trust, and I don't know the law about this, I'd like to follow up.

I asked whether adding a second trustee to an existing trust, to handle an asset that is already in the trust, is "acceptable". Maybe I should have used the word "legal". Is it legally acceptable? And if so, is it unacceptable in some other way? Why is this "not the way it works"?

What if the added trustee is for an asset that is added to the trust at the same time the second trustee is added?

 

[TrustUser]

i am also interested in what tranquility has to share with us, if he chooses to do so.

multiple trustees handling separate properties is not common, for sure. i would say that most of the time, when a parent adds more than one child, they share equal co-trusteeship.

in fact, i have language in my trust document saying that basically the majority rule. but that is when there is more than 1 trustee managing a single asset.

while one of the main reasons for me coming to this forum is to perfect my own estate management, i know i would not do it in the way that you are, at the moment.

i prefer to segregate various assets in separate trusts, especially real estate. one needs to consider asset protection, ease of loan/sale.

i havent worked out a plan that i am totally happy with, as of yet. each has some advantages, and disadvantages.

i dont like the complication of multiple trustees managing separate assets. i am not even too crazy about having multiple trustees. i would prefer to have multiple trusts, each trust managing a smaller portion of the assets.

of course, since i do my own, i dont have to worry about being charged for the cost of making 5 separate trusts - LOL.

as i said previously, once you have gotten honest people, it is unlikely that the same person who deals with rental properties is gonna be the best at dealing with a completely different type of asset.

i currently am trustee for 3 separate trusts, and will likely be for 3 more in the coming years.

yet, i wont deal with rental properties. just not interested in that sort of headache. so that will need to be farmed out to someone else, and decided by the beneficiary, should they end up with rental property.

i would step down as trustee before i would manage rental property.

 

[tranquility]

This gets to basic understanding of trusts and how they work. I could point out all the problems which would develop from such an arraingement no matter how well written, but won't. I could point out the development of trust law, but won't. I'm not here to write a book. Believe me or don't, go to an attorney and ask if you'd like. Maybe he'll spend the hours combing through case law and the like enough to inform you. Of course, you'll have to pay him.

What I do know and can relate quickly is that no one with knowledge does it. There are a lot of smart people who's job it is to think about trusts who come up with complex and bizzare schemes to accomplish a purpose. They don't put different trustees in the same trust in charge of different assets. Why is that?

It's fine to want proof and the like, but trusts are hard and interact in many ways. Maybe I'll scan case law in some spare time and see if there is a single case on point, but I doubt it. We'll see.

multiple trustees handling separate properties is not common, for sure

Do you have *any* examples?

 

[TrustUser]

in terms of examples, it is not like i have access to actual trust documents on the net. unlike wills, they are not public documents.

i am surprised that you have not come across any, while doing your job. i would say that is fairly good evidence of how seldom it is done.

if you come across an item in the law, stating that it is illegal, please share that with us.

have you worked with many large estates ? like hundreds of millions ? if so, there must be more than one person managing all those assets ? what is typical, in terms of managing large numbers of assets ?

to answer your question about why "smart people dont put multiple people managing separate assets" - i am guessing that perhaps they are apt to do what i would do, which is set up more than one trust.

i still stand that i think it is perfectly okay, with regards to the op's question.

thank you for your participation.

 

[JimPeters]

Thank you, I do appreciate your answers. Of course I don't know. Is there a reason you could tell me why it might be a problem in a fairly simple situation (as a trust with just a home, a couple of bank accounts, and a few stocks) to have a separate trustee for one asset such as the home or a bank account?

 

[tranquility]

have you worked with many large estates ? like hundreds of millions ? if so, there must be more than one person managing all those assets ? what is typical, in terms of managing large numbers of assets ?

Not hundreds, but tens of millions. They are managed like all trusts. A trustee (or, unfortunately, co-trustees) legally own the property and manage it for the equitable owners (beneficiaries). They hire people to run things. The trustee(s) is the owner of the trust. This is the legal fiction which all trust law is based. You cannot have one trust with different owners owning different portions of the trust property. This fact is one of the benefits of trusts. The ability to avoid fragmented managment of property when there are multiple owners (beneficiaries).

if you come across an item in the law, stating that it is illegal, please share that with us.

This is a poor question in trust law. "Illegal" is rare. Can you have a trust without beneficiaries? Can you create a trust to reward a person after he has unmarried sex with 100 different people? Can you (generally, states are starting to change) create a trust with the sole beneficiary being any children you may eventually have or to go to a family but then terminate and go to another family in 100 years? Can you create a trust which protects the interest in property retained by the grantor from creditors? In all cases the answer is no. (Although the RAP statement is changing in modern law.) Yet, none are "illegal". The effect of the error is different in each state.

to answer your question about why "smart people dont put multiple people managing separate assets" - i am guessing that perhaps they are apt to do what i would do, which is set up more than one trust.

Yes.

i still stand that i think it is perfectly okay, with regards to the op's question.

One should never try to teach a pig to sing. It wastes one's time and annoys the pig.

 

[JimPeters]

On the other question about the "no contest" clause:

I'm going on the idea that the amendments to a trust are part of the trust (as you said, TrustUser) and that the "no contest" clause would apply.

So, what if an amendment is "iffy", in a gray area, as has been suggested of a couple of things I've mentioned (a special trustee for one asset, or giving a beneficiary use of the house for a year...) ? Would a trustee who is also a beneficiary be subject to the clause, and thus have to accept and not challenge the "iffy" terms of the amendment or else lose his beneficiary share?

 

[tranquility]

Generally, if a person wins a contest, the "no contest" provision does not apply. A trustee would not have standing to challenge the trust.

 

[JimPeters]

Thank you for your answer, tranquility. The trouble is, people like me need a little more explanation to understand. There are missing hows and whys for me. Do you see what I mean?

 

[tranquility]

I'm not sure. Standing is the ability to sue on something. If you hit steve, I can't sue you because I have no standing. If a trust is in error, a trustee can petition a court for clarification of the terms so he can follow the trust, but he can't challenge it as he wasn't hurt. A petition by the trustee for matters shuch as this would not implicate a no contest clause. As beneficiary, he could challenge the trust for some cause.

Anyone who challenges a trust/will for cause and wins, generally does not lose out on a no challenge clause because enforcing it would be against public policy. Only if one challenges and loses would one tend to then lose any rights under the trust/will.