Trusts, Wills & Ancillary Strategies Articles – Trust Protector2021-03-13T06:55:19-07:00

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Trust Protector

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Trust Protectors-More Information2020-03-11T22:03:30-07:00

A trust protector is an independent third party or institution that’s given the authority to perform certain duties concerning a trust.

A trust protector’s role is to ensure that the wishes of the trustmaker—the individual who made the trust—are fulfilled and that the trust continues to serve the purpose for which it was intended. The trust agreement typically details the trust protector’s responsibilities and their areas of authority.

Who May Serve as a Trust Protector

As an independent third party, the trust protector cannot be related to the trustmaker, any of the trustees, or any trust beneficiaries. Sometimes the trust agreement—the trust’s formation documents—will specifically name a trust protector, but it might instead just lay out the process by which a trust protector can be appointed. If the trustmaker is married, their spouse may be granted the power to appoint someone.

Otherwise, the trust beneficiaries can nominate someone, and the court can appoint that individual. If the trust agreement names a specific individual, the document should also specify how that initial person should be replaced if they are unable or unwilling to serve when called to action.

The Powers the Trust Protector Can Exercise

A trust protector is most commonly associated with irrevocable living trusts. For all practical purposes, the terms of these trusts are set in stone. The trustmaker of an irrevocable trust cannot later undo it or take back the property placed into it.

In the case of an emergency, only a trust protector can step in and take action to make things right. An example of a situation that would warrant a trust protector taking action include changes in the economy that cause the trust to lose money at an alarming rate as it’s presently set up. The trustmaker has relinquished all control, so they’re personally powerless to remedy the situation, and it falls on the trust protector to act.

Whether a trust protector can act depends on their powers. The trust protector may be granted limited or expansive powers. At a minimum, they should be able to remove and replace the existing trustees. They may also be given the power to settle disputes among co-trustees, or between trustees and beneficiaries. The ability to alter trust provisions due to unanticipated circumstances, such as changes in the economy or tax laws, is another power that may or may not be granted to a protector.

This power is critical for dynasty trusts that can continue for many years after being set up. Longer timelines increase the possibility of situations arising that would require a trust protector to terminate the trust entirely, to modify the powers of the trustee, to change the situs or legal jurisdiction of the trust, or to correct ambiguities or errors made when the trust was drafted.

Under the laws of some states, the trust protector will be able to exercise these powers without the need for court approval. This can minimize the costs incurred in administering the trust.

Paying the Trust Protector

A trust protector is entitled to compensation for the services they render on behalf of the trustees and beneficiaries. The trust agreement should set forth the method for determining how much they are paid.

Trust Protectors-An Introduction2020-03-11T22:05:25-07:00

Trust Protectors. What they are; When Might You Need One

The concept of Trust protectors — historically used in offshore trusts created by the wealthy who want to protect their assets from creditors — are growing more common in trusts established here in the U.S. by less wealthy persons.

What is a Trust Protector?

A trust protector is someone who is appointed to watch over a trust that will be in effect for a long time and ensure that it is not adversely affected by any changes in the law or circumstances.

There are a number of reasons for appointing a trust protector. Having a protector allows a long-term trust to be more flexible and adapt to factual and legal changes. For example, beneficiaries may get divorced or die prematurely or the law may change. A protector can also be helpful if you believe there may be conflict among the beneficiaries and the trustee or if you don’t fully trust the trustee to fulfill your wishes.

You can name a trust protector in your trust document, which will also dictate the trust protector’s powers. Here are some powers that a trust protector may be given:

  • Remove and replace a trustee
  • Allow the trust to be amended due to changes in the law
  • Resolve disputes between trustees (if there is more than one) or between beneficiaries and the trustee(s)
  • Change distributions from the trust based on changes in the beneficiaries’ lives
  • Allow new beneficiaries to be added if there are additional descendents
  • Veto investment decisions

Whatever powers the trust protector has, you should be as specific as possible in the trust document. The more specific you are, the more likely your wishes will be carried out. An attorney can help you ensure that the trust protector does not have too much power.

Technically, anyone can serve as a trust protector; however, it is a good idea to appoint an independent third party rather than a family member or a beneficiary. A lawyer or accountant may be a good choice. There are also companies that provide trust protector services.

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