As a San Diego estate planning attorney, I frequently encounter clients wanting to maintain control and oversight even *after* they’ve established a trust. The question of requiring dual authorization for large purchases made from trust assets is a common and prudent one, and the answer is generally, yes, absolutely. A well-drafted trust document can—and often should—include provisions for this level of financial control, offering a significant layer of protection against mismanagement, fraud, or simply impulsive spending. This isn’t about distrust; it’s about responsible stewardship of assets intended for beneficiaries, ensuring those assets are used *as intended* by the grantor, even after incapacity or death.
What are the risks of single-signature authority?
Allowing a single trustee to authorize large purchases opens the door to potential problems. Consider this: approximately 1 in 5 Americans over the age of 65 fall victim to financial scams each year, leading to losses exceeding $2.6 billion annually (according to the National Council on Aging). While we hope our appointed trustees are beyond reproach, safeguards are essential. A single trustee, even with the best intentions, might make a poor judgment call, be unduly influenced, or, in a worst-case scenario, succumb to fraud. Requiring dual authorization—meaning two trustees must approve any expenditure above a pre-defined amount—mitigates these risks substantially. It introduces a crucial check-and-balance system, forcing collaborative decision-making and a more thorough review of each expense.
How much should qualify as a “large purchase?”
Determining what constitutes a “large purchase” is entirely dependent on the size of the trust and the grantor’s preferences. It’s not about a fixed dollar amount; it’s about materiality. For a trust with modest assets, perhaps $5,000 or $10,000 might be a reasonable threshold. However, for a substantial trust, that figure could easily be $50,000, $100,000, or even higher. The key is to establish a level that warrants a second set of eyes without creating an undue administrative burden. Remember, establishing this threshold *within* the trust document is critical. That document is the governing blueprint for how the trust operates, and any changes or clarifications should be made through a formal amendment process executed with legal counsel.
I appointed my brother as co-trustee, but he’s always been a bit impulsive; is dual authorization still a good idea?
I recall a client, let’s call her Eleanor, who had similar concerns. She deeply loved her brother, David, but knew he possessed a penchant for spontaneous, sometimes extravagant, purchases. Eleanor established a trust for her grandchildren’s education, naming David as a co-trustee alongside her trusted financial advisor, Margaret. Initially, David bristled at the idea of dual authorization, seeing it as a lack of trust. However, a few months later, he approached me, profoundly grateful. He’d received a convincing proposal for a “can’t-miss” investment in a rare coin collection. He was prepared to authorize the purchase from the trust funds, but Margaret, reviewing the details, uncovered a history of fraud associated with the seller. Because of the dual-authorization requirement, a potentially devastating loss was averted. It wasn’t about doubting David’s integrity; it was about protecting the beneficiaries from a calculated scheme.
My mother didn’t establish dual authorization, and now my uncle is emptying the trust for personal use; what can I do?
Sadly, stories like that aren’t uncommon. I had a client, Michael, whose mother had passed away, leaving a trust for his sister’s medical expenses. His uncle, also a trustee, began diverting funds for his own lavish lifestyle, claiming they were “administrative expenses.” Without the safeguard of dual authorization, Michael felt powerless. Thankfully, legal recourse *was* available. Michael, with legal counsel, filed a petition with the probate court, alleging breach of fiduciary duty. The court, after reviewing the trust documents and financial records, sided with Michael, ordered the uncle to repay the misappropriated funds, and removed him as trustee. The process was costly and emotionally draining. However, it highlights the importance of preventative measures like dual authorization. Had that clause been in place, this entire situation could have been avoided. Establishing clear protocols and mechanisms for oversight is an investment in the future security of your beneficiaries. It’s not just about legal compliance; it’s about peace of mind.
Who Is Ted Cook at Point Loma Estate Planning Law, APC.:
Point Loma Estate Planning Law, APC.2305 Historic Decatur Rd Suite 100, San Diego CA. 92106
(619) 550-7437
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