A trust is a way to help you control who will receive distributions of your wealth—on your terms. A well-crafted trust can preserve your legacy after you die, as well as help your family avoid the hassle of probate court. While you now understand this important legal document, the next question is: what is a trust protector?
What Is a Trust Protector?
Generally, when you create a trust, you name a trustee, or trustees, to help enforce the terms of the document. It’s always a good idea to have extra protection to ensure your wishes are carried out. In addition to a trustee, you can also name a trust protector. What is a trust protector? It is an independent third party or institution who provides oversight of the trustees and funds.
Sadly, where money is concerned, trustees are not always trustworthy. Often, the more money, the more likely a trustee is to abuse his or her responsibilities.
When you name a protector, it has to be someone other than a trustee. In fact, a trust protector can never be named a trustee. This is a good way to prevent the protector from becoming greedy.
The Job of a Trust Protector
The third-party trust protector can be granted limited or expansive duties. At a bare minimum, the protector should have the power to remove and replace existing trustees. Failure to do so means that if a trustee dies and no replacement has been designated, the court will step in and pick one. And as you’re likely well aware, when the courts get involved, they don’t always choose the person or people you might have designated.
In addition, the trust protector can be given the power to settle disputes among co-trustees, or between trustees and beneficiaries, and even to alter trust provisions due to unanticipated circumstances (for instance, changes in the economy or tax laws), and even dissolve the trust.
The Importance of a Well-constructed Trust
If you are setting up a trust that will continue for decades, designating a protector can be critical. If given broad powers, the trust protector (most likely an institution) will be able to adapt the terms of the trust through the generations. In addition, in some states, including Arizona, the trust protector may exercise these powers without the need for court approval.
Beyond Designating Your Protector
A trust protector is entitled to be compensated for the service he/she/it provides on behalf of the trustees and beneficiaries. Therefore, it is your responsibility to determine how that will occur and to clearly document the process in the trust. That means you’ll need to designate the funds for this role.
If you have already created a trust and it does not have a protector, the trust can be reformed. The consent of all parties is required to do so, but it certainly is possible.
As you are creating (or amending) your trust, you will be best served by utilizing the services of an experienced estate attorney. At Poulos Law Firm, we understand all aspects of creating a trust to ensure your heirs are protected and your estate goes where you want it to go. Contact us to schedule an appointment to learn more about trusts as well as in-depth information on what is a trust protector.