Estate plans don’t always sync up with real life. If you don’t make a point of keeping your plan current, let alone adaptable to the future, changes in family circumstances or even the law can prevent your plan from achieving what you intended.
Wouldn’t it be great to have someone to fill the gap, if you died with an outdated estate plan, or if things with your family, your business, and tax laws change down the road? What if your trustee decided to “go rogue,” by running up fees or otherwise taking advantage of his/her position? Having a trust “watchdog” to guard your intentions would be a mighty good thing.
Enter the Trust Protector, a relatively simple solution to all of the above—and the equivalent to a legal loyal, forever-living “watchdog.” While a trustee is someone who has a fiduciary duty to administer an estate, a Trust Protector is someone who oversees that administration, and serves as watchdog over the trustee.
He or she acts as your agent after you’re gone, to ensure the vision you have for your estate lives on … forever.
Regardless of the times or circumstances, your trust protector’s job is to see that your intentions are fulfilled—whether that means firing and replacing the trustee or even reshaping your trust down the road. And he/she can often do this without court involvement. In fact, the authority of trust protectors was underscored by two recent lawsuits—In re Eleanor Pierce (Marshall) Stevens Living Trust and Minassian v. Rachins—both of which upheld the trust protector’s rights.
Why Having a Trust Protector is a Good Thing
An irrevocable trust, by law, is a trust that cannot be altered by the trustee or beneficiaries. This may work great, provided your descendants never divorce, disagree or become estranged from the trustee—to name just a few possibilities. But having a trust protector allows room for the unexpected. When you appoint a protector, you add significant flexibility to the trust document, enabling your trust to be adaptable to changing environments, if necessary, to keep your wishes intact.
For example, you can empower your protector to make changes to your trust, such as renaming trustees, safeguarding distributions to protect, for example, “Special Needs Heirs’ or beneficiaries facing litigation, changing investments or even terminating the trust.
When might a trust protector step in to guard your legacy? Here are nine situations, many of which would be difficult to fix without an appointed “watchdog”:
- To replace a lazy trustee (e.g., who’s asleep at the wheel of your trust administration)
- To remove a beneficiary (e.g., due to death or divorce)
- To change the terms of a trust (e.g., to help a beneficiary who has trouble managing money)
- To move the trust to a more tax-friendly state
- To dissolve the trust (e.g., to sell assets)
- To keep a business in the family (e.g., when one or more beneficiaries wants out)
- To adapt to changing laws (e.g., to minimize estate taxes)
- To allow new beneficiaries to be added (e.g., when there are new descendants)
- To do almost anything to ensure your intentions for the trust are fulfilled
What to Discuss with Your Attorney
In many ways, having a trust protector is a no-brainer. The more specific your trust document, the greater the likelihood everything will go down just as you’d like—in perpetuity.
To make your trust maximally effective, consider adding a trust protector to your estate plan. Your estate planning attorney can help you appoint a loyal ally and craft a document spelling out the specific powers you are granting. It’s a great backup option if you’re lax about keeping your plan current—and even if you’re completely on top of things today. No one can predict the future, and having a trust protector “watchdog” means you don’t have to.