If each one is the other one's co-trustee, that will run afoul of the reciprocal trust doctrine. Marty Shenkman and I wrote an article on this in the April 2012 issue of Trusts & Estates: https://www.kkwc.com/wp-content/uploads ... ctrine.pdf. While the reciprocal trust doctrine is generally viewed in the estate tax context, there's a risk that it could be applied so as to adversely affect the asset protection of the trusts.When we prepared our wills (in 2015), we included a provision that Vanguard be a co-trustee of any trust created under our will. The reason for this was to strengthen the asset protection (from divorcing spouse or creditors) nature of the trust. Since that time, I have come to the view (from a lot of reading on this forum and other places) that a similar level of asset protection can be obtained without the need to necessarily introduce a corporate co-trustee (and the cost and hassle that comes along with that) so long as the trustee follows a HEMS standard for distributions. As a result, we modified our wills in 2020 to eliminate the requirement to have Vanguard (or any other entity) be a corporate co-trustee and to allow the beneficiary to act as the "sole trustee" with distributions tied to HEMS standard.
See this exchange with Bruce on Nov 17, 2020.
viewtopic.php?f=2&t=330184&p=5604125&hi ... e#p5604125
See also his comment on 10/21/20 at 10:31am here:
viewtopic.php?t=328212
For these reasons (among others) we felt comfortable enough to remove the "requirement" that there be a co-trustee. It is now optional.
FWIW, we live in NJ. The laws where you live may be different.
Beautiful, will review the HEMS standard for distributions
Our attorney said to keep assets separate from the trust in case of a divorce settlement or lawsuits is that the beneficiaries should not be the trustee...
Siblings can be trustees of each other trusts to show the clear separation of trustee / assets in a asset protection cases...
Hence only was think of corporate trustees, so there is clear separation of assets from the trust in asset protection cases...
( lawsuit, divorce, mismanagement, etc.. )
Statistics: Posted by bsteiner — Wed Jan 29, 2025 9:50 pm — Replies 11 — Views 1045