Many estate plans today include trusts that become irrevocable upon the trustmaker’s death and continue for the benefit of a surviving spouse, children, or other loved ones. Some trusts are designed to span multiple generations. For example, a trust may leave an inheritance to a surviving spouse, then upon the surviving spouse’s death to their children, and then upon the children’s deaths to grandchildren. Including in the trust a trust protector who will have the ability to make necessary adjustments to the trust provisions as circumstances, beneficiaries, and governing laws change is important.
What Is a Trust Protector?
A trust protector is an individual or group of individuals with the power to ensure that the trustmaker’s purposes and goals are continuously fulfilled throughout the trust’s ongoing administration. The trust protector may be a family member or friend (typically someone who is not a beneficiary or trustee of the trust). Other times, this role is filled by an unrelated trusted advisor or a group of advisors acting by majority or unanimous agreement. The choice regarding whom to name as the trust protector will depend on the trustmaker’s wishes and the trust’s intended duration.
What Powers Should a Trust Protector Hold?
Generally, a trust protector can be given as few or as many powers as the trustmaker desires, subject to state law. While it may be tempting to give a trust protector a wide array of powers to deal with every possible future circumstance, the trustmaker should carefully consider the trust protector’s role and give only powers that will support the trustmaker’s purposes and goals.
Regardless of a trustmaker’s intent, below are three powers that all trustmakers should consider granting their trust protectors:
- Power to amend trust provisions. When a trustmaker creates a revocable trust that becomes irrevocable at their death and is meant to benefit multiple generations, they may fail to update the trust while they are alive and the trust is still revocable. People may forget to update their estate plan, while others have a change of heart near the end of life but do not have time to meet with an attorney. If the trustmaker fails to update the trust to reflect changes in circumstances, beneficiaries, or governing laws while the trust is still revocable, a trust protector may be able to fix these issues after the trust becomes irrevocable. However, the trustmaker can generally put limits on this power so that the trust protector does not have more authority than the trustmaker intends.
- Power to add, remove, and replace trustees. Some trustmakers give beneficiaries the power to add, remove, or replace trustees. However, beneficiaries may be inclined to hastily remove a trustee who does not give in to their every request, defeating the trustmaker’s intent. Granting this power to a trust protector may be a better approach. The trust protector can objectively assess the trustee’s actions or inactions and determine whether the trustmaker’s intent is being fulfilled or derailed.
- Power to change trust situs and governing law. Since it is impossible to predict where the beneficiaries and trustees of an irrevocable trust will live in the future, providing a way to change the trust’s situs (the place or state whose laws govern the trust) is critical. Moving the trust to a different state can help reduce state income taxes, take advantage of more favorable trust laws, or make administration easier if trustees or beneficiaries relocate. Giving this power to the trust protector will allow an objective party to determine if the change will be beneficial or is necessary to carry out the trustmaker’s intent.
Final Thoughts on Trust Protectors
Including a trust protector in an irrevocable trust agreement or a revocable trust agreement that becomes irrevocable at some time in the future is critical to the trust’s success and longevity. Nonetheless, the trust protector should be given only powers that will ensure that the trustmaker’s purposes and goals are ultimately fulfilled.
If you are interested in adding a trust protector to your trust or would like to have the trust protector provisions of your trust reviewed, please call our office.
Call Santaella Legal Group, serving all of California, at (925) 831-4840, or reach out to us here.