You have executed a living trust or a will that provides for the creation of a trust at the time of your death. The trust provides for a successor trustee of your choice and details the duties of the trustee with respect to investments, payment of taxes and other debts, ultimate distribution of your assets, determination of successor trustees, and all the other administrative matters you and your attorney considered while you were drafting the trust. However, nagging in the back of your mind are these questions: Can I make certain that all these well-thought-out provisions will be enforced? What if circumstances or laws change such that my intentions might not be carried out? To assure your concerns you should consider providing for a trust protector in your trust agreement.
The concept of a trust protector is not a new one – it has been fairly common in England for a long time. The trust protector is not the trustee; it is a person or persons named by the grantor of the trust to make certain that the grantor’s intent is carried out, essentially functioning like a board of directors in its oversight of a corporation. The trust protector is designated in the trust agreement, as are his or her duties and limitations.
The trust protector’s responsibilities can be as varied as the grantor desires, including:
• The power to change the trustee. For example, if the trust protector feels the trustee is not responsive to the needs of the beneficiaries or its fees are too high, the trust protector may change the trustee without a protracted and expensive legal battle.
• The power to designate investment advisors. If the trust protector feels the trust investment strategy is not working or simply thinks that diversification may be achieved by using more than one investment advisor, the trust protector could appoint another investment professional.
• The power to amend the trust. If tax laws change, the trust protector could amend the terms of the trust to take advantage of those changes or protect the trust from adverse ramifications of those changes.
• The power to change beneficiaries or delay distributions. The trust protector can be given discretion – within the restrictions determined by the grantor – to change beneficiaries or the timing or amount of distributions to beneficiaries.
The powers that can be given to the trust protector may be very broad, or may be very limited, and focused upon a particular concern of the grantor. The powers could even include the ability to terminate an irrevocable trust and return the trust assets to the trustee. Because the trust protector’s position with respect to the trust can be powerful, careful consideration must be given to the designation of the trust protector and any successor protectors. If you desire to discuss the use of a trust protector in your estate plan, please do not hesitate to telephone us.