Is a Trust Protector for You

Frequently clients are reluctant to make institutions such as a bank with a trust department the Trustee of a Trust for their beneficiaries.

There are many sound reasons to consider an institutional trustee. First and foremost, they are professionals. This means that they have the experience and expertise to not only manage the trust assets, but to deal with beneficiaries who may think they are “entitled”, in the negative sense, and attempt to procure more from the Trust than you intended. This is not a situation you want a family member, particularly a family member who is also the guardian of a minor, to deal with on a regular basis. Second, there may be some reluctance because a fear or concern that the beneficiaries will be stuck with a Trustee that is not competent or sympathetic. Maybe the bank will be bought or merged and the beneficiaries encounter difficulties. There is also a feeling that a relative or individual will be more personally involved, and should therefore be at least co-Trustee.

When any of these concerns about an institutional trustee are raised, the client should consider a Trust Protector. A Trust Protector is an individual who can be given the power and authority to oversee the Trustee, including the power to remove and replace the Trustee if the Trust Protector feels it is necessary or prudent.

There are numerous other powers that can be given to the Trust Protector, including the ability to modify or amend the Trust due to changes in the law (including tax codes), and veto of discretionary distribution and investment decisions.

The Trust Protectors function will be defined by the language of the Trust and adds a layer of protection. Usually a person familiar with the Grantor’s long-term financial and personal goals is selected to serve as the Trust Protector. The Trustee Protector creates a balance of power between the Trustee and Beneficiaries to insure the Grantor’s intent is realized.

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