A trust protector is a trusted advisor who helps trustees carry out the grantor’s wishes and intentions. They are essential to many trusts because they help guide a trust through unforeseen generational changes and help prevent trustee misconduct.
The extent of a trust protector’s powers can vary widely depending on what the grantor allows. However, it’s critical that the trust maker be particular about the administrations they authorize the protector to have – and that those powers be consistent with their intent.
Choosing a Trust Protector
Choosing a trust protector is critical in establishing trust and protecting the people you care about. When building trust, you want to find someone who can carry out your intentions in a way that protects you and the people you love and who is aware of your objectives, driving forces, and values.
You can name a family member or friend, an independent, trusted advisor, or an institution that can serve as your trust protector. It would be best if you also guided your chosen trust protector about what they will be expected to do.
Having an attorney help you with this process is a good idea. You can find an attorney who specializes in trusts and is well-versed in appointing trust protectors.
The lawyer will also be able to advise you on what powers to grant the trust protector and how those powers should be limited. The lawyer can also ensure the trust protector acts in your client’s and the beneficiaries’ best interest.
The appointment of a trust protector is becoming more common in both revocable and irrevocable trusts because it allows the settlor to give trustees flexibility to make changes as the law and circumstances change over time. It also provides peace of mind to the settlor because they know that their trustees are following their directions and acting following their wishes, both now and well into the future.
Defining the Role of the Trust Protector
When people create trust, they do so to protect their estates and loved ones. But once that happens, the emotions can get high, and relationships can break down if those involved don’t have someone to check in on their decisions and ensure everything goes according to plan.
A trust protector can help in this situation. Depending on the rules in your state, a trust protector may be granted various authorities to monitor a trustee and modify its decisions as needed.
For instance, even if all other trustees approve of an investment decision, a trust protector role may be given the authority to veto it.
They can also help resolve disputes between trustees, co-trustees, and beneficiaries. Giving a trust protector the authority to resolve these issues can help avoid the expense, time, and hassle of litigation.
Choosing a trust protector with the proper knowledge and skills to perform these duties is vital. If you are still determining the qualifications for a trust protector, it is best to consult with an attorney.
Defining the Trust Protector’s Powers
A trust protector’s responsibility is to monitor the trustee and beneficiaries to ensure they uphold the trust’s provisions. Generally, this involves keeping current on the trust’s investment decisions, distributions, and other administrative duties.
Sometimes, the protector might resolve conflicts between trustees and beneficiaries or between a single trustee and several beneficiaries. In other cases, they may be tasked with changing the governing provisions of the trust to reflect changes in law or to adjust distributions when there is a change in a beneficiary’s circumstances.
Often, the power of the trust protector is extensive, including the ability to appoint and remove trustees, include or exclude beneficiaries, adjust powers of appointment, and decant the trust into another trust (with certain limits) for specific purposes. However, the extent of these powers should be carefully considered and based on the particular objectives and goals of the trust.
For example, the grantor may want to minimize taxes on the estate. The trust protector could amend the tax clauses to reduce the taxable amount and thus save thousands of dollars in estate taxes.
The trust protector’s powers should be broad enough to allow them to make changes to a trust when needed without having to go through probate court. They should also be able to hire and fire trustees or replace them with a new one.
Defining the Trust Protector’s Duties
Whether creating an irrevocable trust, a revocable trust, or a family trust, you can name someone (a trustee or a committee) who can take charge of some issues related to your trust. That person is called a trust protector, and they have the powers to review financial transactions, discharge and replace trustees, resolve disputes, and more.
The duties of a trust protector are often described in the trust document. They ensure the trustee carries out the grantor’s wishes and protect beneficiaries from an overreaching trustee.
They can also help trustees understand the terms of the trust and how to interpret them. They can also change the trust if legal, tax law, or beneficiary circumstances require them.
Another essential duty of a trust protector is to ensure that the trustee’s decisions about the trust’s distributions are made objectively and impartially. That’s why it is common for protectors to be appointed by an independent trustee or an institution, such as a family office or a professional trustee.
While the role of a trust protector cannot be fulfilled by any individual, including the trustee or even a beneficiary, it can provide peace of mind to those with a long-term trust. It can be conducive when a client’s wishes and intentions must be more explicit and transparent.