This blog discusses the advantages and disadvantages of naming Co-Executors in a Last Will and Testament, Co-Trustees in a Living Trust, and Co-Agents under a Durable Power of Attorney or Health Care Power of Attorney, as well as the recommendations I generally make for each.
For context, with virtually any fiduciary role in estate planning, a client generally has the option either to nominate a single individual to serve primarily or successively, or to nominate multiple individuals to serve together, either primarily or successively.
Also important in this discussion is how co-fiduciaries are authorized to serve or act. In most situations, co-fiduciaries may either be required to act jointly and concurrently or may be empowered to act independently, without the joinder, knowledge or consent of the other. This distinction is critical and will also be discussed throughout this blog.
Co-Executors
An Executor is a fiduciary nominated in a Will who is charged with probating the Will and administering the probate estate. The process of probating a Will and administering an estate is a court-monitored procedure.
While nominating Co-Executors often seems like an attractive option to clients, I tend to discourage it except in specific situations. There is generally no prohibition against nominating Co-Executors and empowering them to serve or act either jointly or independently. Moreover, N.C.G.S. § 28A-13-6 appears to specifically permit it and provides that “if a will expressly makes provision for the execution of any of the powers of personal representatives by all of them or by any one or more of them, the provisions of the will govern.”
The authority for co-fiduciaries to act independently is often critical in avoiding deadlocks, as well as preventing delays and decreasing efficiency. However, from a practical standpoint, co-executorships can still be cumbersome. In practice, clerks, financial institutions, and third parties often expect both Co-Executors to execute important probate documents and act concurrently throughout the probate process.
Additionally, probate is generally a structured process with a relatively predictable beginning and end. Therefore, many of the practical advantages of co-agents under powers of attorney, which can involve unpredictable tasks and years or even decades of service, are often not present in estate administration.
For these reasons, I generally recommend against nominating Co-Executors except in particular circumstances. One example may involve blended families in which one child from each spouse is nominated as Co-Executor. In those situations, the checks and balances provided by having representation from each side of the family may outweigh the inconvenience associated with the court often requiring both executors to participate in every task involved in the probate process.
If it is decided to name Co-Executors to serve jointly, it is critical to include methods for preventing or resolving deadlock and conflict between the Co-Executors.
Co-Trustees of a Living Trust
Clients who create a Living Trust must nominate a Trustee or, if they are serving as the initial Trustee, nominate one or more successor Trustees.
One of the many advantages of Living Trust based estate planning is that trust administration is generally not court-monitored. Therefore, if Co-Trustees are nominated, authorizing them to act jointly or independently is often advisable and typically operates smoothly and as intended.
Again, the authority for co-fiduciaries to act independently is critical in avoiding administrative deadlock, delay, and decreased efficiency. It is important that this authority be specifically included in the trust agreement because the default rules under N.C.G.S. § 36C-7-703 generally require majority action by trustees, or unanimity if only two trustees are serving, except in limited circumstances.
Generally speaking, trustees are not automatically liable for actions taken by a co-trustee in which they did not participate, although trustees may still have duties in certain circumstances to address known breaches of fiduciary duty. Additional language addressing trustee liability and reliance may also be included in the trust agreement.
In general, I tend to advise that naming Co-Trustees can be beneficial and can add convenience and efficiency to trust administration when they are empowered to act independently. That said, one potential downside in authorizing action jointly or alone is the reduction of checks and balances that may exist when co-trustees are required to act together. But even when fiduciaries are authorized to act independently, both have the authority to access information which provides some oversight over the independent actions of the other.
Co-Agents Under a Durable Power of Attorney
An agent under a Durable Power of Attorney handles financial and property matters for a principal, often during periods of cognitive or physical decline.
N.C.G.S. § 32C-1-111 provides that “[a] principal may designate two or more persons to act as coagents. A principal may expressly require in the power of attorney that coagents act jointly. If a principal does not expressly require that coagents act jointly, each coagent may exercise the coagents’ authority independently without the knowledge, consent, or joinder of any other coagent or coagents.”
Additionally, the statute provides that “an agent that does not participate in or conceal a breach of fiduciary duty committed by another agent, including a predecessor agent, is not liable for the actions of the other agent.”
As discussed throughout this blog, the ability of co-fiduciaries to act independently is often key in avoiding deadlock and administrative inefficiency.
Out of all fiduciary nominations, the Durable Power of Attorney role is often the role best suited for co-agents behind the spouse, if applicable. Generally, spouses are nominated to serve alone initially, while children or other trusted individuals may be nominated as successor co-agents.
As mentioned, the role of agent under a Durable Power of Attorney can be one of the most unpredictable and enduring fiduciary positions. It can involve a wide variety of responsibilities depending on the affairs and condition of the principal and can continue for many years or even decades in some situations.
Nominating Co-Agents and empowering them to serve or act jointly or independently can create significant convenience and efficiency because whichever agent is most available at a given time can step in and act. It can also create a “tag-team” approach in which responsibilities are divided based on the strengths, availability, or expertise of each agent. Again, even when fiduciaries are authorized to act independently, both have the authority to access information which provides some oversight over the independent actions of the other.
Co-Agents Under a Health Care Power of Attorney
Agents under a Health Care Power of Attorney direct healthcare providers regarding the principal’s medical care during periods of temporary or permanent incapacity.
If specifically stated in the document, Co-Agents under a Health Care Power of Attorney may be empowered to act jointly or independently in much the same manner as under a Durable Power of Attorney. There is no statutory default for Health Care Powers of Attorney, so careful drafting is important. While this may initially appear to provide similar convenience and efficiency, there is a critical difference.
The role of a healthcare agent is often a much more emotional and intimate role involving sensitive medical decisions and communication primarily with the principal’s attending physician and healthcare providers.
As a result, even when co-agents are authorized to act independently, practical problems can still arise. For example, if both agents are simultaneously involved and provide conflicting instructions to physicians or healthcare providers, the jointly-or-independently language may become effectively meaningless in practice.
Therefore, if co-agents are nominated in a Health Care Power of Attorney, it is critical to include methods for preventing or resolving deadlock and conflict between the agents.
For this reason, I typically recommend against naming co-agents under a Health Care Power of Attorney, although such arrangements can work well in certain family situations when appropriate safeguards and decision making procedures to precent deadlock are included.
Summary
The decisions surrounding the selection of fiduciaries and the structure of how they will serve are among the most important decisions in estate planning.
Clients often ask whether they should name two children or multiple individuals in their estate planning documents. My advice depends heavily on the particular fiduciary role involved, the personalities and abilities of the individuals being considered, and the family dynamics as a whole.
While I do have general recommendations for each fiduciary role, my ultimate advice can vary significantly depending on the surrounding circumstances.
Notwithstanding my recommendations, the decision is ultimately the client’s, and it is one that should be approached with careful thought and analysis.
Andrew M. Brower is a Board Certified Specialist in Estate Planning & Probate Law at Law Firm Carolinas, which has five offices and a statewide practice. For questions about estate planning and administration, wills and trusts, guardianships, or Medicaid/long-term care and asset protection, contact Law Firm Carolinas.