What Is a Trust Protector?
A Trust Protector is someone appointed to watch over a Trust, keep that role for a long time, and ensure that the Trust is not adversely affected by changes in circumstances or the law.
Typically, there are three roles to appoint when setting up a Trust:
1) trustor, 2) trustee, and 3) beneficiary. All three roles are necessary to create a Trust that functions properly. Some Trusts are designed to last for generations, but a Trust Protector is a fairly new role in the U.S. for estate planning purposes. As the number of Trusts designed to last for generations grows, estate plans need more flexibility. A Trust Protector can be given certain authority over the Trust, such as removing or appointing trustees, adding or removing beneficiaries, and amending or even terminating the Trust. This ensures that your original intentions are honored, despite changes in law or circumstances.
How Is a Trust Protector Selected?
A Trust Protector may be an individual or group of individuals, such as family members, business associates, friends, attorneys, accountants, even other professional advisors. The naming of a Trust Protector may be specific, such as “my neighbor John Doe,” or general, such as “a CPA selected by the majority of the owners of the [ABC CPA Firm].”
Who Makes a Good Trust Protector?
I always say to choose a good, experienced estate planning attorney, whom you entrust to keep the family harmony, backed by applicable documents. Similarly, because a Trust Protector may have many and varied powers, that individual should be knowledgeable and suited for the role. For example, the Trust Protector should have some understanding of tax law should tax laws change, and have the power to amend the terms of the Trust.
I recommend that your Trust Protector understand your family history and desires of the trustor. You may even select more than one Trust Protector, or a committee of Trust Protectors.
What Does a Trust Protector Do?
Based on your wishes, the purposes of the Trust, and applicable laws, the Trust Protector can hold many different powers, including administrative powers traditionally held by a trustee, such as the power to make distributions, and powers traditionally held by a court, such as the power to remove beneficiaries. Trust Protector powers can include the power to:
- remove a trustee or appoint a successor trustee
- add or remove beneficiaries
- amend the trust agreement
- exercise the voting rights of closely held business interests owned by the trust
- interpret the terms of the trust
- veto or direct trust distributions
- terminate the trust, and
- appoint and remove members of a distribution or investment committee
A good estate planning attorney will include any of these or other Trust Protector powers only after careful consideration of your desires and purposes for creating the Trust.
Why Include a Trust Protector in Your Trust-Based Estate Plan?
There are several reasons to include a Trust Protector in your trust-based estate plan:
- I frequently reference peace of mind with my clients. Trust Protectors offer that as well as increased flexibility. No one knows what the future may hold, and the idea of a perpetual Trust that may last for generations can be a daunting one. I want to ensure that your Trust achieves your goals, despite potential changes in circumstances or laws.
- A Trust Protector can ensure that a trustee is carrying out the Trust’s purposes. If the trustee is delinquent in that role, a Trust Protector may remove the trustee and appoint a better-suited trustee, or, help a trustee correctly interpret provisions and address changes in the law or beneficiary circumstances.
- Trust Protectors provide an easier and less costly means of modifying a Trust. If a Trust needs to be modified after the trustor’s death, usually the only route is through the court system, which we know is a complicated and costly process. Giving a Trust Protector the power to modify the terms of a Trust can prevent the need to go to court to modify the Trust.
Does Every State Allow Trust Protectors?
Many states, including Illinois, have adopted a uniform or modified set of laws governing Trust Protectors, though some states have not addressed it at all. Consult an attorney familiar with your state’s laws to understand whether Trust Protector provisions are right for you and your goals.
Contact us at 708-448-5169 to learn more about naming a Trust Protector. We are happy to answer any questions you may have and help you craft an estate plan that is perfect for you and to keep your family harmony.
