What is a Trust Protector?

CompleteMyEstatePlan always includes a Trust Protector in your Trust document. It is an invaluable protection tool for the Trust and is what separates CompleteMyEstatePlan from our competition.

A trust protector is generally someone with a special power over the trust or over the trustee, but with no day-to-day fiduciary responsibilities.  The trust protector may also be a committee of several people with such power and may effectively serve as a kind of board of directors overseeing the management of the trust.  A trust protector can add flexibility to the trust and serve as a check and balance to trustee abuse.  Some trusts may have such a provision, but reference it as a “special trustee” or “independent trustee.”   Using a trust protector provision may be limited and relatively conservative, or it may be closer to necessary full protection. 

First, why do people consider having such a person or power?  In three words: control, flexibility and security.  People who transfer their hard-earned dollars to a trust for their family often want as much flexibility for the trust as possible - without adverse tax or asset protection consequences. Those who execute trusts (a.k.a. settlors, grantors or trustors) cannot generally be trustees or keep the right to amend the trust without adverse estate tax or asset protection consequences, but want the trust operation to accommodate future circumstances and protect their original intentions. A Trust Protector has multiple purposes and duties:

• Insulate the Trustee from Negative Influences. One of the Trust Protection's foremost duties is to protect the Trustee of the Trust from the negative, or potentially negative, influences of third parties or even unscrupulous heirs. Moreover, the Trust Protector's job is to protect the Trust Estate and its beneficiaries from damaging, or potentially damaging, conduct by the Trustee.

  
  

• Carry out the Wishes of the Trust Creator. Another job of the Trust Protector is to help ensure that the purpose in establishing this Trust Agreement, (provide for college, special needs, installments, ...) will be properly carried out.

• Making Adjustments to Meet Changing Laws and Conditions. The Trust Protector is to adapt the provisions of the Trust Agreement to law changes, jurisdiction changes, changes in interpretation of the law or other changing conditions that threaten to harm the Trust or its beneficiaries, while always keeping in mind the wishes and desires of the creator of the Trust.

  
  

Who can be a Trust Protector?

A Trust Protector should be an independent 3rd party. As such the following would not qualify: spouse, ancestor or descendant, brother, sister, employee of such beneficiary or of any corporation, firm or partnership in which such beneficiary is an executive or has stock or other holdings which are significant from the viewpoint of control, or is otherwise "related or subordinate to" such beneficiary under IRC Sections 674(a) and (c). Thus, a trust protector should ideally be an independent party who is not a beneficiary. 

A trust protector may serve without fee, as is typical with a family member.  Professionals may charge a modest annual fee, or more typically charge an hourly fee based on the time actually spent. Usually provisions do not call for extensive annual reviews of trustee performance, but the rather for review only under extraordinary circumstances.  Depending on the circumstances, such flexibility may be worth it.  

By having a trust protector (and, of course, provisions for successor protectors) named in a trust, many people will feel more comfortable in creating an irrevocable trust or establishing one that may become irrevocable at death.  This is especially true for the increasing use of dynasty trusts.  The trust protector offers a powerful tool in the estate planning arsenal and greater assurance that the original intentions of the client will be carried out – no matter what events transpire in the future.

CompleteMyEstatePlan.com's legal professionals and customer support can help guide your choice of a Trust Protector and assist with the necessary legal updates to ensure your Trust protects your family for years to come.