by Kevin M. Buttery, Esquire
When planning your estate, it is often advisable to utilize a trust to effect one or more of your goals. The trustee of such a trust can, and in certain circumstances should, be a corporate entity, also known as a corporate fiduciary. However, you may not want to relinquish control of your assets to somebody outside of the family. To overcome this uncomfortable proposition, your attorney may suggest that you appoint a “Trust Protector” for your trust. While a Trust Protector may sound like a super hero wielding unending power, the role is really meant to be filled by somebody with very limited powers as to the actual administration of the trust who will oversee the corporate fiduciary. Typically, the trust protector is empowered with the ability to remove and replace a corporate trustee with another corporate trustee. Trust protectors can also be given the power to make limited changes to the trust, which might be required if the beneficiary moves to a different state or changes his or her name. The trust protector, therefore, reduces the possibility of the trust incurring additional expenses in situations where one would otherwise need to resort to the jurisdiction of the courts.
A Trust protector is often a trusted family member or other individual trusted by the grantor of the trust. The grantor has the ability to name this person outright along with successor trust protectors. The list of successor trust protectors normally falls in line with the paradigm implemented in your Powers of Attorney and Will, but it does not have to. The type of trust often dictates who the trust protector should be.
For a Special Needs Trust, the trust protector cannot be the beneficiary of the trust, but it can be a close family member of the beneficiary. The trust protector is particularly useful in a Special Needs Trust. A corporate fiduciary is normally appointed for a Special Needs Trust, which by its very nature involves attention to a complex set of laws, regulations and restrictive distribution standards. If the beneficiary is not getting what he or she needs from the corporate fiduciary, the family has the ability to exercise the trust protector provision.
Often in estate and Medicaid planning, implementation requires transfer of some assets to close, younger family members in trust. Often this provides tax and other estate administration advantages. This type of trust is commonly known as a Children’s Trust. With regard to a Children’s Trust, a trust protector is useful when it would be ill-advised or impossible to name a close family member as a trustee, thereby requiring the appointment of a corporate trustee. This could be the result of minor children, untrustworthy family members, or simply the lack of trustee candidates to choose from. When a corporate trustee steps in the shoes of a family member to handle a Children’s Trust, providing for a trust protector is a great way to safeguard the assets you are transferring away from yourself for estate and tax purposes.
More generally, a Grantor Trust utilized for estate planning that becomes irrevocable at death may include a trust protector provision. Such trust protector should have the ability to amend or modify the trust where it would otherwise be irrevocable due to the terms of the trust. Often this is a shortcut to altering or amending the trust, which could otherwise be a lengthy court ordeal.