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Cotrustees: Liability and Administration

With many trusts, particularly family trusts, the settlor (i.e., trust-creator) does not want to appear partial when selecting selecting trustee(s). It is a delicate balance between maintaining harmony while selecting the person(s)/entity that will best serve as a trustee. One common way that the settlor addresses this issue is by selecting cotrustees.

Missouri has several provisions applicable when there are cotrustees. Generally, the cotrustees shall act by majority decision; and when there is a vacancy in a cotrusteeship, the remaining cotrustee may act for the trust. Therefore, because cotrustees must act by a majority (or unanimously if there are only two), it is paramount that the cotrustees be able to work together jointly. Indeed, lack of cooperation among cotrustees is a basis for trustee removal if it substantially impairs the administration of the trust. In emergency/urgent circumstances where one cotrustee is absent, ill disqualified or otherwise temporary incapacitated, and prompt circumstances are present, the other cotrustee may act for the trust.

The breach of trust and liability analysis is slightly complicated when there are cotrustees. Every cotrustee is obligated to exercise reasonable care to (1) prevent a cotrustee from committing a serious breach of trust (i.e., a flagrant violation of a trustee’s duty to a beneficiary) and to (2) compel a cotrustee to redress a serious breach of trust. Furthermore, a dissenting trustee who joins in an action at the direction of the majority is not liable for the action — unless it is a serious breach of trust. Consequently, a cotrustee in the minority can technically incur liability for the actions of the majority.

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