When Do Kentucky Co-Trustees Have to Act Jointly

The basics of Kentucky trusts

So, in Kentucky, people always opt for a revocable or irrevocable trust arrangement.

• Revocable trust. A revocable trust, aka a living trust, is a flexible arrangement in that the settlor can change it or even entirely do away with it during their lifetime. Otherwise, the trust becomes irrevocable upon the settlor’s demise.
• Irrevocable trust. This type of trust can’t be changed in any way or revoked by the settlor, but beneficiaries can opt to do that following the latter’s death. Irrevocable kinds of trust are essential for keeping creditors from accessing assets for debts, as they can’t compel one to remove property from the trust. Check out our guide on Kentucky Irrevocable Trust

What about Pour-Over Will?

Apart from these two types of trusts, you may also encounter an instrument known as a Pour-Over Will. People often think it’s a type of trust, but it isn’t. This is an essential instrument, especially in addition to a revocable trust. It ensures that everything not titled in trust automatically becomes a part of the arrangement when the owner dies.

For example, if you took an asset from a revocable trust and forgot to update it before you die, it returns to the trust. Other properties and assets you acquire later in life also become part of the trust. Anyway, let’s discuss the roles and responsibilities of co-trustees. This is especially helpful if you find yourself being called to act as one among many trustees of an estate.

What are the powers of co-trustee

A co-trustee arrangement refers to a situation where a trust names multiple trustees. For example, a parent may name their children to be appointed estate trustees when they die. Acting as a trustee is a big responsibility requiring time commitment, record keeping, fiduciary, and such demands. Naming co-trustees eases the burden. That said, as a co-trustee, one can’t simply point to fellow co-trustees and avoid liability.

Co-trustees are responsible for managing the assets in trust according to the settlor’s wishes. That means using your judgment, deciding matters, developing and acting as an individual, or cooperating with fellow trustees to manage an estate efficiently and avoid misconduct.

A co-trustee cannot simply sit back, relax, and leave everything to other co-trustees because they are well-off enough to take breaks from work or live closer or can handle it all. Remember, this is a paid responsibility; you may be sued for collecting fees without a show of work done. Additionally, things could go wrong; your duty as a co-trustee is to keep an eye on properties, assets, and investments to benefit beneficiaries.

The primary duties of a trustee or co-trustee in Kentucky are:

• Taking reasonable steps to locate, take control, inventory, and protect the trust property
• Administering the trust solely in the interest of the settlor’s immediate heirs and or beneficiaries
• Exercising reasonable care, skill, and caution in managing the trust
• Paying creditors and potentially preparing and filing tax returns
• Maintaining accurate and up-to-date records, which includes reporting to the beneficiaries as the Kentucky statute requires
• Making investments whose risk levels gel with the trust’s objectives and established risk tolerance.
• Avoiding commingling personal assets with those of the trust
• Keeping separate checking accounts and investments
• Avoiding using trust assets for personal benefits

When do Kentucky trustees need to work together?

If there are two trustees, the powers conferred to them shall be exercised only by both. So, for example, if there are two trustees and one or all of them decide that it’s appropriate to sell the family home after a parent’s death so they can divvy up the sales proceeds to beneficiaries, it’s going to take all of those trustees to put up the home for sale, conduct the sale, and do other similar tasks.

Kentucky law requires two co-trustees to act together. However, the trust instrument could state something different, such as that either one of the co-trustees can act as a trustee, meaning they are the officially recognized trustee.

If there are more than two trustees, Kentucky law says that a majority of them may exercise a power vested in three or more trustees unless the grantor’s instructions provide otherwise, as stated in the trust instrument.

Some of the tasks that will require joint action (unless stated otherwise, as explained above) include:

• Distributing assets. When it comes to divvying up trust assets, co-trustees must be in agreement.
• Making major investment decisions
• Major investment decisions typically require co-trustee approval.
• Preparing and filing tax returns. See our guide on Kentucky Trust Accounting Requirements.
• Selling assets in a trust
• Cooperating with the probate process

Kentucky Trust Litigation

Helping co-trustees understand and execute their responsibilities smoothly and efficiently is only a tiny part of our services. Trust and estate execution can involve other issues like litigation. This is where a beneficiary has suspicions about the trust’s validity or the way it’s being executed and decides to formalize the legal dispute and involve the probate court.

Such cases involve several legal hoops to ensure things are done correctly and starve off nuisance suits from dissatisfied beneficiaries or creditors. Anyway, we practice trust litigation, so if you need representation in such matters, we would be happy to provide support throughout the process, including case investigation, evidence gathering, case pleadings, discovery, witness deposition, negotiation, mediation, trial, appeal, and such kinds of processes. Call today to speak with the Best Kentucky Trust Litigation Attorney and figure out your legal options.

When Is Kentucky Probate Required

Trusts are meant to keep asset sharing from court processes, but there are situations where probate court involvement becomes necessary and co-trustee cooperation is required. A Kentucky probate court can come into play in trust execution in the following cases:

• Beneficiaries regarding the validity of a trust, for example, in situations where a beneficiary needs their Kentucky Trust Contested for one reason or another.
• Petition for appointment of co-trustee or successor trustee due to death, incapacity, removal, or resignation of the original trustee. Once appointed, the successor trustee can formalize their authority by filing a document with the county recorder’s office where the trust holds real property. Check out our guide on Kentucky Affidavit of Successor Trustee – What to Know to learn more about the process and the associated Kentucky probate fees.
• Interpretation of ambiguous trust wordings
• Beneficiaries concerns regarding current trust accounting job
• Insolvent trusts
• Trust modification or termination
• Breach of fiduciary duty

Kentucky breach of fiduciary duty

The role of trustee or co-trustee is a challenging one. We discuss time commitment, record keeping, fiduciary duty requirements, and demands. Needs must, but though so, one has to act. It is a fiduciary. If you are believed to be in breach of your duty of good faith, care, and loyalty, you could be brought up on Kentucky  Breach of Fiduciary Duty Damages charges and ordered to pay disgorgements, surcharges, and reimbursements to compensate those you’ve harmed emotionally and financially.

Examples of breach of fiduciary duty include:

• Self-dealing
• Withholding benefits for malicious reasons
• Failure to pay creditors and taxes
• Failure to disclose conflict of interest
• Commingling personal and estate properties leading to estate losses
• Failure to disclose records
• Negligence as in reckless investments leading to losses or insufficient care leading to asset loss via theft, misappropriation, unnecessary depreciation, and such like things

To summarize, co-trustees are needed in estate situations involving complex assets, large assets, and multiple beneficiaries with competing interests. These can be stressful. The settler usually names co-trustees to be appointed in the event of the former’s demise.

Such arrangements require careful navigation. Depending on the settlor’s instructions or Kentucky law, whichever takes supersedence, one may be necessary to make wise decisions, act as an individual, or cooperate with other trustees. An attorney may not be required. Still, it sure does make things right as rain, especially when a co-trustee doesn’t have the knowledge, time, or resources to handle and distribute the assets personally.

On that note, contact our Hess-Verdon & Associates attorney to learn how we can help you or your family.