When you create a trust, choosing a trustee is one of the most crucial decisions you can make. You want someone who is trustworthy and competent, a person who will serve your best interests and anyone else who will benefit from the trust. But some people still want to put a check on the power of the trustee. They might also fear that unexpected situations may arise that the trustee is not prepared for.
To handle such concerns, some trust creators name a person to be a trust protector. Forbes explains that a trust protector has various powers over the trust. Though not a trustee, a trust protector can watch over a trust and handle issues a trust creator did not anticipate or address while creating the trust.
Powers of a trust protector
As a guardian of a trust, trust protectors may keep watch over the actions of a trustee. If a trustee abuses the power of the position, a trust protector may remove a trustee and name a replacement. Trust protectors may also alter beneficiaries, make changes to administrative provisions, approve or disapprove of investment decisions, and change the situs of the trust.
Trust protector ambiguities
The problem with trust protectors is that it is not always clear what a trust protector is. According to the American Bar Association (ABA), trust protectors may run into legal trouble if their roles are fiduciary in nature. A trust protector with fiduciary duties owes a standard of care to those who benefit from the trust. This opens up the protector to litigation if the beneficiaries believe the protector is breaching his or her duty.
Some people also confuse a trust protector with a trust advisor, thinking the two are basically the same. The ABA explains that in practice, the two have different duties, with a trust advisor making financial decisions that usually mirror the fiduciary duties of a trustee, while a trust protector takes on non-administrative duties over the trust but does not share duties with the trustee. However, the roles of a trust advisor or a trust protector may vary depending on state law and the construction of the trust.
Naming a trust protector may offer peace of mind to people who want to create a trust but fear what will happen to the trust over time. However, naming and giving power to a trust protector is no simple matter. Trust protector requirements are subject to state law, plus not much case law exists to interpret law regarding trust protectors. These are issues may require assistance from legal counsel to understand how to proceed.