- Authored by: Michael L. Rutkowski
Trust protectors have been long used in trusts created for the wealthier of our population but are becoming more common place among anyone engaging in the estate planning process. A trust protector is appointed by the creators of the trust to watch over the trust, making sure it is not adversely affected by any changes in the law or circumstances.
There are numerous reasons for appointing a trust protector. Use of a trust protector primarily allows for flexibility in the event of factual and legal changes. For example, beneficiaries may get divorced or die prematurely, or the law may change over time. The trust protector may also be used if you feel there may be conflict among your beneficiaries and the trustee.
When naming a trust protector in your trust document, you will also be able to 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 lives of beneficiaries
- Allow new beneficiaries to be added if there are additional descendants
- Veto investment decisions
Whatever powers you wish for the trust protector to have, you should be as specific as possible about these powers in the trust document. The more specific you are, the more likely your wishes will be carried out. And 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 independent entities that provide trust protector services.
The key to understanding what a trust protector can do for you is to keep in mind that the trust protector offers protection to the trust estate and the beneficiaries against any law changes, trustee vacancies, and/or disputes that arise in the estate. A trust protector’s ability to restate or amend a trust, appoint a trustee, or settle a family dispute can eliminate the need for an expensive and public court hearing on a private family issue. Trust protectors, usually attorneys, are the perfect parties to offer their clients the security of knowing that the plan they drafted has an outside eye ready to look over and protect the intent of the original plan. Contact our office today to learn more about how a trust protector can help you.
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