Legal Blog

The Weekly Scenario: What Is A Trust Protector?

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 sshane@offitkurman.com or 301.575.0313.

ABOUT STEVE SHANE

Steve Shane Casual Smallsshane@offitkurman.com | 301.575.0313

Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.

 

 

 

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the mid-Atlantic region. With over 185 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our twelve offices serve individual and corporate clients along the I95 corridor in the Virginia, Washington, DC, Maryland, Delaware, Pennsylvania, New Jersey, and New York City regions. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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