Trust (As a verb)

Trusts are very personal. The key to understanding how important a Trust Protector can be is to look past the word ‘trust’ as a noun, and focus on the word ‘trust’ as a verb. Anyone who establishes a trust must trust that any fiduciary, whether it is the trustee, the investment manager, or the special needs advisor, is able to perform their role with the utmost integrity. Unfortunately, this does not always happen.

A trustee’s actions should be in accordance with the provisions of the trust, governing law, and in the best interest of all of the beneficiaries. How can clients trust that this will happen? The grantor of the trust can establish a specific role called the Trust Protector. The Trust Protector can act in a fiduciary or non-fiduciary capacity to, among other functions, ensure that all other fiduciaries are performing their duties properly. The Trust Protector is often an individual who is familiar with the family dynamics and the intentions of the grantor of the trust.

Having a Trust Protector in place to keep an eye on the fiduciaries lends a high degree of comfort to a grantor who is hesitant to hand over responsibility in an often uncertain and costly manner. A Protector can also remove and replace a trustee if necessary.

Why A Trust Protector?

Whether a trust deals with a large sum of money or a small amount of money, it is never a bad idea for trust creators to add an extra layer of accountability to the trustee in control. The bigger the trust, the better chance there could be issues concerning the integrity of the individual named trustee.

With trusts for which the primary purpose is to accumulate wealth, there are often (not always) real concerns of misconduct. A Trust Protector’s central role is to make sure that the appointed trustee is acting in the best interest of the trust characteristics and beneficiaries involved–protecting the integrity of the trust.

Who Can Serve As Trust Protector?

There are a few limitations that keep anyone from being able to serve as the Trust Protector of your trust. As a third party, the Protector can not be related to the creator of the trust or beneficiaries of the trust. In some cases, the trust will already have a Protector appointed, or contain the process to appoint one. If the creator of the trust is married, the spouse has the power to appoint a Trust Protector.

One of our Trusted Advisors at Concentus Private Trust can help you determine what you need and what roles your specific Trust Protector should have power over to best serve the grantor.

If a Trust Protector has not been appointed or even discussed in the current trust, they can be nominated by the trust beneficiaries, and the court can appoint that specific person. When creating the document, it is essential to specify how the Protector should be replaced if the selected individual is not able to perform the duty.

A Trust Protector’s Powers

Trust creators can grant a Protector with a range of powers. At the very least, the Protector should have the power to replace the existing trustees. Often, this is the furthest the Protector’s powers go, and in many cases, that is all that is needed.

If your trust is experiencing an emergency–the trust cannot complete its stated duties, or there has been a sizeable unexpected loss of funds–only the Protector can step in and correct any issues at hand. In this case, the trustee would have no power. All the power would be in the Trust Protectors’ hands.

When appointing a Trust Protector, it is vital not to give the Protector “too much” power, or they may be at risk of putting the Protector in the position of co-trustee. Directing the Protector to simplify the duties as much as possible is key here.

Ideally, a trust should only appoint a Protector with these three powers:

• The power to terminate a fiduciary
• The power to change the trust situs
• The power to add or remove beneficiaries

One of our Trusted Advisors at Concentus Private Trust can help you determine through trusted service what would work in your best interest when discussing a Protector of your trust.

Contact one of our Trust Consultants now for trusted guidance in trust services.