What exactly is a Trust Protector? You may be familiar with phrases like “objective third party,” “check and balance for the trust administration process,” or the “superhero of trust administration.” But what does this mean and do Trust Protectors live up to the hype?
The short answer is yes, they live up to their hype and can positively impact the administration of a trust well beyond the grantor’s lifetime. A Trust Protector is a third party given power within the trust to oversee the trust administration and act as the eyes, ears, and voice of the grantor when they are no longer available. They can provide flexibility in an otherwise inflexible irrevocable document, often being granted powers to change trustees, alter administrative provisions, and sometimes even change beneficiaries.
Who Can Serve as a Trust Protector?
Typically, an attorney or another independent trusted professional is called upon to serve in this role. The individual should be close enough to the family to understand family dynamics and apply an objective lens to balance those dynamics with the grantor’s intent. It is generally not recommended for a beneficiary to serve as a Trust Protector due to potential conflicts of interest.
Powers of a Trust Protector
Trust Protectors are typically given broad authority over trust administration, including advising and supervising trustees, overseeing distributions to beneficiaries, resolving disputes, and responding to changes in the law or family circumstances. Here are some common powers a Trust Protector may be granted:
- Advise parties regarding trust terms.
- Choose or remove trustees and advisors.
- Direct trustees regarding special distributions.
- Veto trustee decisions or distributions.
- Determine compensation for trustees and other advisors.
- Amend the trust, including technical and broader adjustments for changes in the law.
- Arbitrate disputes between trustees and beneficiaries or between beneficiaries.
- Grant, modify, or revoke a beneficiary’s power of appointment.
Importance of a Trust Protector
The Trust Protector holds a powerful role in ensuring the grantor’s aspirations are fulfilled and navigating the ongoing trust administration process, which can last many years after a grantor’s passing. We encourage everyone to discuss the merits of including a Trust Protector with their estate planning professionals.
Our team at Crestwood is here to provide further insights and support. Please reach out to us to start the conversation and explore how we can assist you in this important decision.
