Your Financial Gatekeeper

How to Obtain Peace of Mind with a Trust Protector

An irrevocable trust makes for a smooth transfer of wealth to family members – with the an additional tax-advantage bonus. However, you must relinquish control of the assets placed within the irrevocable trust while setting it up. What you control from there is who will eventually manage the distribution of wealth and assets after your passing. You appoint the trustee. And if you’re not completely confident that a single trustee will carry out your wishes in full, you can establish a trust protector, as well.

What Does a Trust Protector Do?

A trust protector is essentially the “board of directors” to the designated trustee. The trustee handles the trust on a day-to-day basis, while the protector manages the trustee and helps make critical decisions moving forward, such as high-value investment transactions or the sale of closely held business interests.

There is almost no limit to the powers you can bestow on your designated trust protector. You can allow a trust protector to replace a trustee, to appoint a successor trustee or a successor trust protector, and to approve or veto investment or beneficiary distribution decisions. He or she can also resolve disputes between trustees and beneficiaries.

A Quick Word of Warning

While it may be tempting to provide a protector with a broad range of powers, this may hamper the original trustee’s ability to manage the trust efficiently. Keep in mind that the idea is to protect the integrity of the trust, not to appoint a co-trustee. You don’t want too many cooks in the estate planning kitchen.

Exercising Discretion to Reach Estate Planning Goals

Trust protectors offer a variety of added benefits:

  • A protector with the power to remove and replace the trustee can do so if the trustee develops a conflict of interest or fails to manage the trust assets in the beneficiaries’ best interests.
  • A protector with the power to modify the trust’s terms can correct mistakes in the trust document or clarify ambiguous language.
  • A protector with the power to change the way trust assets are distributed if necessary to achieve your original objectives can help ensure your loved ones are provided for in the way you would have desired.

*These are just a handful of examples showcasing how the appointment of a designated trust protector can help ensure you achieve your estate planning goals.

This Is Not a Light Decision

Picking the perfect trust protector is critical to your estate planning strategy. Given the potential power this person will have over your family’s wealth, you will want to choose someone you have immense trust and confidence in. This person should be qualified to make investment and other financial decisions on your behalf. Many individuals choose to appoint a trusted financial advisor — such as a long-term accountant, attorney or investment advisor — who may not be able or willing to serve as trustee, but can provide an extra layer of protection by monitoring the trustee’s performance.

Contact Holbrook & Manter today if you would like to learn more about incorporating a trust protector into your estate plan.