Number of trustees: Overview, definition, and example
What is the number of trustees?
The number of trustees refers to the total count of individuals or entities appointed to manage a trust. Trustees are responsible for overseeing the trust’s assets and ensuring that the terms of the trust agreement are followed. The number of trustees in a trust can vary depending on the size of the trust, the complexity of its assets, and the wishes of the trust creator (the grantor). Having multiple trustees can provide checks and balances, whereas a single trustee may be appointed for simplicity and efficiency.
For example, a family trust may have two trustees, a parent and an attorney, to ensure that decisions are made with input from both a family member and a professional.
Why is the number of trustees important?
The number of trustees is important because it determines how decisions will be made regarding the trust’s management, distribution of assets, and other responsibilities. The more trustees there are, the more collective decision-making power is required, which can help prevent conflicts of interest and provide a broader perspective on managing the trust. However, having too many trustees may lead to delays in decision-making or potential disagreements. Conversely, appointing a single trustee provides a clear decision-maker but places all responsibility and liability on one individual.
For beneficiaries, the number of trustees can impact the trust’s operations, including how efficiently decisions are made and how well the trust is managed. For trustees, it establishes the extent of their authority, responsibility, and the scope of collaboration with other trustees.
Understanding the number of trustees through an example
Imagine a charitable trust is established with the goal of providing scholarships to underprivileged students. The grantor decides to appoint three trustees: a lawyer, a financial advisor, and a community leader. The three trustees will collectively make decisions regarding the distribution of funds, the selection of recipients, and the long-term management of the trust’s investments. Having three trustees allows for a diversity of perspectives and expertise, ensuring that the trust operates fairly and effectively.
In another example, a family trust is created by a couple, and they appoint themselves as the sole trustees. This makes the trust simpler to manage, as only the couple makes decisions about the distribution of assets. However, this arrangement also means that if they are unable to manage the trust, the successor trustee must be carefully chosen to take over.
An example of a number of trustees clause
Here’s how a number of trustees clause might appear in a trust agreement:
“The Trust shall be managed by no fewer than two (2) and no more than five (5) Trustees, who shall be appointed by the Grantor or the designated successor. The Trustees shall act jointly and must reach a majority decision on all matters relating to the Trust, including the distribution of assets and investments. If the number of Trustees falls below two (2), a successor Trustee shall be appointed as outlined in Section 5.”
Conclusion
The number of trustees in a trust plays a critical role in how the trust is managed and how decisions are made. Whether there is a single trustee or a group of trustees, it is important to establish clear guidelines for governance, decision-making, and responsibilities to ensure the trust’s success. Understanding the optimal number of trustees and their duties helps ensure that the trust is administered properly, in accordance with the wishes of the grantor, and in the best interests of the beneficiaries.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.