Question: What is a Trust Protector?
A person who creates an irrevocable trust cannot generally retain rights to change the trust, particularly if he wants the trust to keep the favorable attributes of an irrevocable trust. But what about giving another person the right to make certain changes in the trust (so long as there is no agreement for the person so appointed to carry out directions of the settlor).
This person who has this authority is often referred to as a “trust protector.”
The concept of a trust protector has its origins in foreign trusts, especially those set up for asset protection purposes. Although an individual might have needed to use a foreign trustee in order to avail himself or herself of the asset protection laws of an overseas jurisdiction, there was often a reluctance to actually give authority over distributions to that foreign trustee. To avoid this, foreign trusts would often include the appointment of a trust protector, who was usually a family member, close friend, or trusted advisor, who would have the power to direct the trustee regarding such distributions. The trust protector might also have the right to amend the trust and remove the trustee and appoint a successor trustee.
Some states have adopted these ‘asset protection’ statutes and accordingly, the concept of a trust protector has become more common in domestic trusts. A uniform law called the Uniform Trust Code (or UTC) adopted in many states in whole or in part, permits the settlor to designate a third party to direct modification or termination of the trust. This ‘third party referred to in the law has been referred to as the trust ‘protector’.
Trust Protectors can do many things including the ability to remove and appoint a trustee, terminate the trust, change the situs of the trust, and amend or modify a trust.
Comment: A trust protector can even be given very broad authority to rewrite a trust. But is it a good idea? And if so, who would be willing to serve in such a role?
As always, if you have any questions or would like to learn more, please contact Steve Shane at email@example.com or .
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