A Short Overview On Trust Protectors

In this article, I’m going to be discussing trust protectors. Trust protectors are a recent innovation in the law of estate planning. They have started to emerge in the last twenty or thirty years. The trust protector role comes from the asset protection area of estate planning.

A Recent The Innovation Info Estate Planning

The scenario was that people were squirreling their money away in asset protection jurisdictions and giving up control of millions of dollars to an independent third party trustee. However, if you’re going to do that, you want to make sure that the trustee isn’t going to embezzle or steal your money.

And so there was a need for another check on the trustee, to make sure that there’s some oversight of the trustee, especially if you’re going to be giving up control of your assets and going to Bermuda or Panama or any of these estate planning jurisdictions. So asset protection attorneys invented a new role: the Trust Protector. The Trust Protector was originally conceived of as a hedge against Trustee malfeasance.

But the trust protector plays a very valuable role in other scenarios as well. And I really think it is one of the biggest areas of innovation going forward in estate planning.

The modern conception the role of the Trust Protector is that we want someone there who can fix things. The trust protector role is really envisioned as a safety valve in case there’s ever a disagreement between the trustees and the beneficiaries to the trust.

We want the trustee to carry out our wishes in a way that’s appropriate and will support the beneficiaries.

Have Someone There For You to Fix Things

It’s really nice to have someone who’s empowered to fix things in the event that things start to go sideways. At Speedwell Law, we’re really thinking about avoiding court as much as possible for our clients, and the trust protector role is one of the primary ways in which we achieve that objective.

So for instance, one of the powers of the trust protector is the ability to resolve deadlocks or differences of opinion or disagreements between trustees. So if you’ve appointed two people, for example,  two children, to be co-trustees on your trust, then that’s a one to one deadlock if they disagree. You need someone there to break that tie. That’s one of the powers of the trust protector.

Another primary responsibility of the trust protector as we envision it, is planning for incapacity. And so estate planning isn’t so much about taxes anymore as it is about planning for incapacity and planning for efficient distribution of your assets. And one of the roles or one of the powers of the trust protector is the ability to appoint and remove trustees. That’s a very big power that you’re going to be giving to someone. The ability to appoint and remove a trustee is a very drastic remedy.

But let’s not imagine that there’s a really contentious situation. What we’re really worried about is incapacity or unwillingness or inability to serve by a nominated successor or trustee. And so if that ever were to happen, let’s say, that you had appointed your brother to be your trustee, but your brother at the time of authority incapacitated by dementia when they’re going to serve as trustee.

Wouldn’t it be nice to have someone there to say, “That person is inappropriate to serve as trustee. I’m going to remove that person and appoint your son to be a trustee.”

One of the first decisions you have to make as an estate planning attorney is you have to decide how you’re going to be involved in people’s affairs when they pass away. You can tell I’m a young guy and I’m likely to outlive a lot of my clients.” So there’s a lot of attorneys in my role that would want to appoint themselves as trustee of your trust. And now there’s good reasons for why they might want to do that.

Who to Select as a Trustee vs a Trust Protector?

The goal is to achieve efficient and professional administration of the trust but it makes me a little uncomfortable to envision your attorney as your trustee because it’s typically a compensated position, and I prefer to keep the money in the family. Moreover, the Trustee role isn’t really overly legalistic It’s really more of a logistical and administrative role. You’re marshaling assets, your managing assets and your distributing assets. And so I don’t really see it as an attorney role.

However, the trust protector role is very legalistic in nature. You’re getting the ability change the status of a trust, resolve disputes, deadlocks of opinion, be the final arbitrator of trust language and intent, and more

So that is a much more legalistic role where I can add value to clients without necessarily writing myself into your plan to achieve a fee. here might be good reasons that the trust protector would be involved in your affairs, although we hope that everything goes smoothly and efficiently and that the trust operates as intended and distributes your assets as you intend. But in Estate Planning, our motto is, hope for the best, plan for the worst

And so the trust protector role is envisioned as a safety valve. We do commonly nominate ourselves as trust protector in our client’s estate plans. It’s becoming a very common practice in the law to do so. And I think that that’s the best way for me to give my clients the peace of mind that they need to know that their estate isn’t going to end up in court.

If you are interested in learning more about trust protectors, make sure that you set up a consultation with Misha Gill. You can make a consultation appointment today through his office number (703) 553-2577 or directly through his email [email protected].