Trust Protectors, while a fairly new tool in the estate planning world, are quickly becoming a wonderful protection mechanism for Arizona trusts. At its most basic level, a trust protector is someone who may potentially, at some point in the future, serve as an appointed authority over a trust. This authority can offer your trust an added layer of protection from circumstances unforeseen at the time of signing. Crucially, such protection can be achieved without going to court – a key benefit which saves time and money and honors family privacy.
5 Key Ways a Trust Protector Can Help You – Your trust protector can:
- Remove or replace a difficult trustee or one who is no longer able or willing to serve
- Resolve conflicts between beneficiaries and trustee(s) or between multiple trustees
- Modify how distributions from the trust are made because of changes in beneficiaries’ lives (e.g. premature death, divorce, drug addiction, disability, or lawsuit)
- Adjust trust terms when legal changes occur at the federal and/or state level (as are bound to happen)
- Apply the laws of another state to the trust if it is determined to be advantageous to the trustmaker(s) and/or beneficiaries
NOTE: a trust protector is very different than a trustee, who is in charge of carrying out the trust’s terms; a trust protector ensures that a trustee (i) maintains the integrity of the trust, (ii) makes solid distribution and investment decisions, and (iii) adapts the trust to changes in law and circumstance.
There is, however, one power our office feels should never be given to a trust protector – the ability to add, remove, or alter trust beneficiaries. That being said, our firm prefers to grant the trust protector a wide-range of other powers to ensure a client’s goals are carried out in the most effective way possible (with as little tax implications, court involvement, and familial bickering as possible!). After all, the entire idea of utilizing a trust protector is to both preserve and enhance the trustmaker’s original intent.
It is important to note a trust protector cannot appoint himself/herself. Typically, our firm will hold the right to nominate the trust protector in the future, should one be necessary (we choose to never serve as trust protector as we, the drafting firm, see it as a conflict of interest to fill both roles). Pragmatically, appointment occurs when a member of the family contacts us and we agree there is a need for a trust protector to serve.
Can You Benefit from a Trust Protector? Generally speaking, the answer is yes. Trust protectors provide tremendous flexibility for the future administration of a trust while ensuring the original goals of the trustmaker(s) are ultimately achieved. Trust protector provisions may easily be drafted into a new trust while older trusts usually can be reformed to add the provisions. If you have trusts you’ve created or are the beneficiary of a trust that feels outdated, call our office now.