When
discussing estate plans with clients, they are usually familiar with the
concept and duties of a Trustee. However, most clients, even those with
existing estate plans, are not familiar with the concept of a Trust Protector,
a position which may be equally as important.
A
Trust Protector is an individual named in the trust, typically in a
non-fiduciary capacity, with a power to act under a specifically enumerated
list of powers that are not available to the Trustee. The specific powers
available to the Trust Protector are predetermined by the grantor at the time
the trust is drafted. They can be customized to ensure that the Trust Protector
has enough power to act in the necessary scenarios while also ensuring that the
Trust Protector does not have too much power over the trust agreement.
Specific
powers commonly include the power to amend or modify certain provisions of the trust;
the power to change the situs of the trust; and the power to remove and appoint
a trustee. However, once the trust agreement is signed, the powers of the Trust
Protector are locked, as the Trust Protector does not have the ability to
expand his or her own powers (however, he or she may reduce his or her own
powers).
The
position of Trust Protector is extremely important within an irrevocable trust
since irrevocable trusts are generally not amendable. If an irrevocable trust
does not have a Trust Protector, the ability to make changes to the trust is
limited and must meet certain requirements per statutes which may result in a
time consuming and costly court proceeding.
Although,
the position of Trust Protector is most commonly used in irrevocable trusts, we
also highly recommend their use in revocable trusts; as such trusts will
eventually become irrevocable upon the death of the grantor. If you have an
existing revocable trust agreement which does not contain Trust Protector
Provisions, it may be advisable to contact our office to include such position
into your estate plan.
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