- Consumer
Trust Protectors
Including a trust protector in your estate plan may be a powerful tool to provide flexibility, checks and balances on a trustee and more. A trustee is a person designated in a trust agreement who may be given the powers state law permits. State law varies so you always have to check with an attorney in the estate where the trust is created to be sure what is permissible to do. The trust document will often delineate what specific powers the person acting as trust protector will be given. A common power, and sometimes no more than this is granted, is to remove and replace the trustee. This can be an important safeguard if a trustee does not perform well, or worse, is taking advantage of the trust. For example, revocable trusts are a powerful tool to manage assets as you age or if you become incapacitated. What if you name a child as trustee and that child takes financial advantage of trust assets for their own benefit. If the other heirs want to replace that child it may be difficult or impossible. The courts may not view the other children, as mere future beneficiaries after you pass, as having the right (standing) to sue the trustee. Even if they can, they will have to pay for legal fees from their own pockets during the suit, which may make an effective action to remove the trustee impractical. Meanwhile, the bad-child who is trustee may be able to use trust assets, your money, to defend themselves. If instead a trust protector were named, that trust protector may simply remove and replace the bad trustee. The power of a trust protector can be significant so care must be given to who you appoint to such a position. Also, trust protectors can provide flexibility to make changes to a trust instrument if tax and other laws change frustrating the initial intent for the trust. An important decision to make when drafting a trust naming a trust protector is whether that person should be required to act in a fiduciary capacity or not.
