- A trust protector can add an extra layer of protection to your estate, ensuring your wishes are carried out as intended.
- You don’t need to be wealthy or leave behind a large inheritance to appoint a trust protector.
- They can provide peace of mind, especially when there is expected family conflict, miscommunication, or unique beneficiary needs involved.
If the concept of a “trust protector” is new to you, you’re not alone. Up until the 1990s, the role was familiar almost exclusively in the context of offshore trusts established in tax havens, such as Panama or the Cook Islands. Individuals establishing such trusts popularized the role in response to concerns about entrusting assets to a professional trustee in a foreign country. A trust protector, then, was often a trusted family friend, attorney, or advisor who is assigned important legal powers, including the ability to remove the trustee, change the jurisdiction of the trust, and—depending on the arrangement—perform other important tasks.
Why Are Trust Protectors Gaining Domestic Popularity?
It makes sense that, when transferring big sums of money into a foreign account in a loosely regulated country, you would want an extra layer of protection. What’s not quite as clear is why you would need the same at home. After all, trust advisors have long existed to ensure assets placed in a trust are well-managed, and domestic legislation exists to hold trustees accountable.
While this may be true, the simple fact of the matter is that these protections are oftentimes not enough. As trusts have increased in popularity, many states have introduced legislation aimed at attracting a part of the lucrative trust industry to their shores (however metaphorical). Alaska, Delaware, and Nevada, for instance, have all adopted advantageous legislation aimed at creating conditions previously only available offshore. Business has followed, and with it, business practices…
Having a trust protector alongside a trust advisor is now common, and both positions serve an essential role. A trust advisor addresses a much broader set of concerns relevant to the maintenance and distribution of trust assets. A trust protector, normally, is singularly in charge of ensuring the trustee (the person or business responsible for managing the trust) does not abuse their position. Other responsibilities and powers can be granted to a trust protector, but their essential role is to remove the trustee, should they be found engaged in profiteering.
Who Needs a Trust Protector?
It’s easy to assume that trust protectors, trust advisors, and professions of this ilk are the purview of the super wealthy, but this is not true.
Everyday individuals employ trusts to streamline their estate planning, fund their children’s education, and keep their assets out of probate court, among many other uses. Whenever a trust is created, a trustee is appointed. Even revocable living trusts—among the most common and simplest variety—require oversight. Though you may be the settlor, trustee, and beneficiary while living, when you die these roles pass to others. Whoever you’ve appointed as successor trustee is the person you need to worry about.
Naturally, you invest time and careful thought into appointing a trustee, but this doesn’t diminish the fact that you also invest a lot of, well, trust in them. It’s nice to think a loved one or close associate would never abuse your vote of confidence, but it happens. In fact, it happens fairly often.
Instituting a trust protector is simple and intuitive. You trust your car manufacturer, but you wouldn’t drive without insurance. Likewise, you trust your trustee, but you would be silly to overlook the need for oversight.
Choosing a professional trustee, such as an estate planning attorney, who is familiar with your family and their dynamics can be a great option. This person can bring both experience and act as a neutral party when navigating the emotional and logistical choices involved in managing your estate. Even if your family doesn’t get along or disagree, a professional trustee is a safe and smart choice to ensure that your estate is carried out following your intentions.
A trust protector can also be a valuable addition to your trust. Choose this person wisely, as they have a wide range of power, including the ability to remove a trustee if something goes wrong or if the trustee is not carrying out their job duties. While a trust protector does not carry out the day-to-day tasks, they oversee the estate and ensure it is managed and carried out according to your wishes. This person can provide peace of mind especially if your trustee is a family member or a close friend. A trust protector is especially helpful when there’s conflict or even just miscommunication between the trustee and the beneficiaries.
A trust protector also comes in handy when minors or disabled beneficiaries are involved. For example, they can ensure an 18-year-old doesn’t suddenly gain full access to a large amount of money, or help ensure a disabled loved one is protected and supported correctly. The trust protector acts more like an overseer, making sure everything goes the way it’s supposed to.
Frequently Asked Questions
What is a trust protector?
A trust protector is someone you appoint to oversee the trustee and ensure your estate is being properly managed and carried out. They are responsible for resolving issues that may arise while playing a neutral role, all with the goal of ensuring your wishes are met as you intended.
What is the difference between a trustee and a trust protector?
A trustee carries out the day-to-day tasks and manages the trust, while the trust protector oversees the process and has the power to step in if conflicts arise.
Do I need a trust protector in my trust?
Not necessarily. They are not always needed, but it is a smart decision to name a trust protector, especially if your trustee is a family member or a close friend. If you expect any family conflicts or have minors or disabled beneficiaries, a trust protector can ensure peace of mind as they will ensure your wishes are carried out as you intended.
Who should I name as a trust protector?
Anyone you choose—a family member, close friend, attorney, or advisor. In best practice, you will want to choose someone that has the best interest and can play a neutral role.
Can a trust protector change my trust?
It all depends on how much power you leave them. Oftentimes, a trust protector will need to update a trust depending on any law changes or if the trust needs to be moved to a different state.
Contact Caress Law
To learn more, do not hesitate to contact the dedicated team at Caress Law either by calling (503) 292-8990 or using the contact form below.
