You work hard to create your Trust and your estate plan and you want the terms of your Trust carried out the way they were drafted. But how can you be sure your named Trustee will perform as instructed after your death or upon incapacity? Sure you may have chosen a trusted person to act as Trustee, but how will they actually perform? And how will their performance be viewed by the Trust beneficiaries (i.e., usually your children and other family members)?
There are times when a Successor Trustee either violates their duties (whether it be intentional or unintentional–by not taking the proper actions), or the beneficiaries have the belief that a Trustee is not acting fairly (especially if the Trustee is also a beneficiary as when a single sibling acts as Trustee for his brothers and sisters). It does not much matter whether a breach of trust is actual or perceived because litigation (lawsuits) can result from either situation.
In comes the Trust Protector. A Trust protector is simply a special Trustee. Someone appointed in the Trust document for a very limited and specific purpose. For example, the Protector could have the final say in when to make distributions from the Trust and how much should be distributed. This provides the appearance (and actuality) of a neutral third party making an important decision rather than a self-interested Trustee.
But the Trust Protector can be used for more than that. The Trust Protector can:
- Make or consult on investment decisions,
- Have veto power over certain (or all) decisions of the Trustee,
- Have veto power over distributions to the Trustee,
- Be a tie-breaker vote between two Co-Trustees,
- Set compensation levels and advise on hiring professionals, and
- Manage certain Trust assets.
In other words, the Trust Protector can be used however you like, the sky is the limit. In fact, each time I incorporate a Trust Protector into a Trust I am amazed at how versatile the concept is and how many different ways it can be used. It is a very personal device that can provide peace of mind, along with actual peace between the beneficiaries, when the time arrives.
So get creative and find ways to help protect your Trust for the benefit of your family and beneficiaries.