In this article, we answer the question, “what happens if co-trustees disagree in Illinois?” We explain the pros and cons of multiple trustees and co-trustee disputes and litigation in illinois. We also answer the question: “what happens if co-trustees are deadlocked in Illinois?”
A reader asked the following question (paraphrased):
I am a co-trustee with three other trustees. The trust document states property should be maintained for the enjoyment of beneficiaries. If three trustees do not want to repair a roof and one wants to repair the roof, what does Illinois Law say about that?
If you are creating a trust, naming multiple trustees has the advantage of the trustees placing checks on one another. The idea is to preserve the status quo unless you have a majority agreement. Each trustee can oversee the others.
The downside to the multiple trustee strategy is that it adds an extra level of complication to managing your trust. For example, in order to engage in bank transactions or real estate closings, the trustees will often have to all be together in person to provide their signatures or otherwise provide for a proxy via power of attorney. This can be logistically difficult.
A more costly issue arises if the trustees disagree. If the trustees are unable to come to an agreement, this may lead to costly and stressful litigation in the probate court, which is likely to be a detriment to your beneficiaries.
The language of your trust generally controls trustee decision-making. This means that the terms of your trust will determine what actions trustees can take unilaterally, what actions require a majority vote, and what actions require unanimity.
In the absence of instruction from the trust document, Illinois law provides that a majority vote of trustees will control.
But what if the trustees are deadlocked? Again, the language of the trust controls. A well drafted trust should provide for this contingency. The trust may provide that in the absence of a majority vote, certain actions may not be taken and the status quo must be preserved. On the other hand, it may provide that the beneficiaries or another third party serve as a tie-breaker. In the absence it may provide that the trustees submit their dispute to mediation and/or arbitration.
If the trust is silent on the issue of a deadlock, the trustees should consider negotiating a tie-breaker or alternative dispute resolution in order to avoid litigation.
If the trust is silent regarding trustee deadlock, one of the trustees can file a petition with the probate court to decide the issue. The court will resolve the deadlock if a decision is necessary to effectuate the purpose of the trust. This generally comes down to whatever action is most beneficial for the beneficiaries while still effectuating the grantor’s intent in creating the trust. This will require an evidentiary hearing during which each side will have the opportunity to make an argument to the court and present evidence.
If one trustee is no longer fulfilling his or her fiduciary duty to the act for the benefit of the beneficiaries according to the terms of the trust, the other trustees or the beneficiaries can petition to have the trustee removed. This will require proof at an evidentiary hearing that the trustee is no longer fit to serve as trustee or has breached his or her fiduciary duties.
O'Flaherty Law is happy to meet with you by phone or at our office locations in: