Trust protectors accomplish tasks that trustees cannot due to tax considerations, legal prohibitions, or disability and death. They monitor the trustee’s activities and can even remove a misbehaving trustee.

As a professional with the time and knowledge to do the job, they can provide greater oversight than friends or family. They can also make the Trust Irrevocable.

They Can Fire the Trustee

A Trust Protector like CunninghamLegal has several vital powers. Some of the most common are to remove and replace a trustee, control investment and distribution decisions, and veto the trustee’s actions. Understanding what powers are granted before a protector is named is essential.

Suppose your Trust has an irrevocable structure, and you are worried that a future trustee might act in their best interests or due to personal grudges against a beneficiary. In that case, it is recommended that a Trust Protector be named. This person is an outsider who can fire the trustee and uphold the original intentions of the Trust.

For example, you set up a trust to help your child with special needs or prevent spendthrift heirs from wasting their inheritance. A well-drafted Trust Protector clause can ensure the trust assets are used as intended, even after your death.

The person you appoint as a Trust Protector should be someone you trust. Still, it should also be an individual with the expertise to manage particular asset classes and specialized tax issues. For this reason, you should not appoint a family member already serving as your trustee or a beneficiary of the Trust. In addition, a Trust Protector should not be related to you or any of the beneficiaries, as this could jeopardize the asset protection and tax benefits of your Trust.

They Can Change the Terms of the Trust

When drafted correctly, a Trust Protector can be granted a wide range of powers that allow them to change your Trust’s terms without going to court. These can include removing and replacing trustees, changing investment and distribution decisions, amending the name of the Trust or its location, and even vetoing trustee actions. The person selected to serve as a protector must have a detailed understanding of your family history and the Grantor’s original intent for the Trust.

They also need the technical expertise to respond to changing laws and family circumstances. For example, it is not uncommon for a beneficiary’s inheritance to be taken by creditors or for tax law to switch between the time your Trust was written and when you passed away. Your Trust Protector can change the terms of your irrevocable Trust to prevent that from happening before or after your death.

Having this power can save your beneficiaries from having to file for bankruptcy, fight unwarranted lawsuits or pay excessive fees to settle them. It can also keep them from relying on public benefits like Medicaid for healthcare and support when they need it most. And it can protect their inheritances from unforeseen events like a catastrophic accident, divorce, or bankruptcy. A well-written Trust Protector clause can help protect your legacy from creditors, litigation, and predators while allowing beneficiaries access to their inheritance for financial independence and happiness.

They Can Make the Trust Irrevocable

The trust document should limit the powers of a Protector to allow them to fire any trustee who is not acting by the Trust’s original intent. In some cases, a Protector is also given the power to appoint a successor trustee – although this should be avoided unless you have a lot of confidence in the person chosen for this role. A Protector should never be a family member or close friend of the creator of the Trust; the idea here is that they are an outsider who could remove any trustee who would be acting in their self-interest or who has committed fraud or incompetence.

Beneficiaries often change their circumstances; they may get divorced, become addicted to drugs, or develop irresponsible spending habits. A well-drafted Trust Protector clause can save them from losing their inheritance to creditors.

It’s also common for laws and family configurations to change over time, requiring amendments to the Trust. A Trust Protector can make these changes without involving the court – saving heirs and beneficiaries time and expense. They can make necessary changes to accommodate things like changing tax rates, merging multiple trusts, and adding or removing beneficiaries. They can also make changes to resolve disputes between co-trustees or change distributions based on beneficiary needs or circumstances.

They Can Make Changes to the Beneficiaries

When creating a trust, your clients can instruct their attorneys to include a provision that allows beneficiaries to name a Trust Protector unanimously. Ideally, they want to ensure that their Trust is protected if something happens between when it is written and when the trustees take over (whether it be a lawsuit or a change in the law).

A trust protector can also help ensure the Trust does what the settlor intended. This could mean changing terms to comply with changes in the law, amending the Trust to reflect changes in family circumstances, or resolving disputes between co-trustees and beneficiaries.

Of course, a Trust Protector must be a person who can understand the settlor’s intentions and have the professional time to manage the Trust properly. This may be more challenging than naming your friend Fred to the role because, let’s face it, Fred will probably need more time to do it, and he might be dead when a decision is necessary.

A Trust Protector can also offer recommendations when it comes to beneficiary designations. For example, suppose a disabled or special needs beneficiary moves to a state with different laws and public benefits systems. In that case, the Trust Protector can make changes to preserve their service eligibility. They can merge multiple trusts to simplify administration and reduce costs by eliminating duplicate taxes and fees.


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