As you are forming your Trusts and planning the details of your estate, one of the most important details you may be considering is implementing a Trust Protector. However, if your Trust already has a Trustee, do you really need a Trust Protector?
Understanding the role and responsibilities of a trust protector is essential before you make the decision to appoint one. If you are interested in finding out more about whether a trust protector is a good fit for your trust and estate plans, reach out to a knowledgeable Missouri trust attorney at The Law Office of David S. Schleiffarth, LLC for the legal advice you need when you need it most.
What Is a Trust Protector?
A trust protector is different from your trustee. The trustee of your trust is responsible for trust administration and ensuring your instructions are followed. However, a trust protector is responsible for holding power over someone else’s trust.
Trust protectors are typically third parties that oversee the trustee’s power and can modify the terms of trusts as long as they are in compliance with the grantor’s intent. In this way, the trust protector can make decisions regarding matters that may have otherwise been unforeseen, such as adult children having additional grandchildren after the grandparents passing.
Appointing a trust protector can help your family avoid points of contention, hostility, and even probate court, making them an attractive option for anyone who is forming a trust or crafting their estate plans.
Does a Protector Control a Trust?
And trust protectors can be given a wide array of responsibilities. Trust protectors are fiduciaries, so they are required to act in your best interest at all times. Some of the different responsibilities of a trust protector include:
- Trust distribution decisions
- Trust investment decisions
- Replacing a trustee
- Controlling the assets within the trust
- Removing trustees
- Vetoing trustee decisions
- Amending a trust
- Protecting your assets from creditors
- Naming new immediate successors when initial trustees step down
While a trust protector does not officially control the trust, the immediate successor does. Trust protectors are in place to help protect beneficiaries from immediate successors who made “go rogue”.
The intervention of a trust protector may become necessary if the immediate successor is incapable of being impartial with beneficiaries, seems to be diverting from your instructions, or is handling your estate to further their own financial interests. Trust protectors can also become active if a beneficiary requests that they step in to take action.
What Is the Difference Between a Trustee and a Trust Protector?
There are significant differences between trust protectors and trustees. Your trust protector should be an impartial third party who has the power to make important decisions regarding your trust. Trustees can be family members, friends, or professional entities who have a fiduciary duty to follow the instructions you have outlined in your trust.
Trustees do not have the authority to make changes to your instructions, while your trust protector does. Trustees are bound to the terms of the trust in question and are required to make decisions and handle the assets contained within the trust ethically. If a trust protector has reason to believe the trustee is not doing so, they can step in and limit the trustee’s powers or make changes to the trust accordingly.
Other differences between trustees and trust protectors include:
- Trust protectors cannot make trust payouts or disbursements, while trustees can
- Trust protectors can modify trust provisions to ensure the grantor’s intent is followed, while trustees cannot
- Trustees cannot make corrections or omissions to trusts, while trust protectors can
- Trust protectors can include new instructions for the trustee to follow
- Trust protectors can make changes to irrevocable trusts, while trustees cannot
One of the top benefits of having a trust protector is the ability to ensure changes can be made to your trust without having to go through court or rely on a judge. When your trust successor makes omissions or introduces new instructions, they are acting as a substitute for decisions that may have otherwise been made by the court.
Are Trust Protectors Fiduciaries?
The laws regarding trust protectors are limited in Missouri. Generally, trust protectors are expected to have a fiduciary duty to the trust beneficiaries. You should always be able to trust that your trust protector will act in your best interest and that of your beneficiaries.
However, in the state of Missouri, a settler has the right to override the presumption of fiduciary duty. This may make your estate plans more complex. For this reason, assigning a trust protector who you unequivocally trust is essential if you are going to name one as part of your trust administration instructions.
Can Trustees Be Trust Protectors?
Under the law, trust protectors do not need to be attorneys, but they cannot be trustees either. Trust protectors must be a third party to the trust.
This means the grantor cannot be a trust protector, the trustee cannot be a trust protector, and beneficiaries cannot be trust protectors. Additionally, anyone who is subordinate to the grantor or related to the grantor is also prohibited from acting as a trust protector.
Costs of Trust Protectors
When choosing a trust protector, it is important to consider the cost. Many people believe assigning a family member to act as their trust protector will save them money.
However, hiring a trust protector and compensating them fairly for their services may be in your best interests if you hope to ensure your instructions are carried out as you have instructed. It is also important to consider the cost if you do not hire a trust protector and your family has to bring your estate to probate court.
This could cost tens of thousands of dollars or more, which would be far more expensive than hiring a trust protector, which will help your family avoid putting your estate through probate. Fortunately, even if you have already crafted your estate plans, formed your trust, and selected your trustees, you can go back and assign a trust protector by adding a trust protector clause to your estate plans.
Who Should Have a Trust Protector?
You may not be sure whether having a trust protector is in your best interests. Many people assume that unless they have significant wealth, a trust protector is unnecessary. However, there are many instances in which it may be wise to assign a trust protector. These situations might include:
- Wanting to protect your trustee by assigning a trust protector to guide and advise them
- When you have to shift assets due to family modifications
- When implementing long-term trusts as opposed to living trusts
- When you hope to protect your beneficiaries inheritance from creditors
- When there are special assets within the trust that need to be carefully monitored, such as is often the case with trustees who have limited knowledge about the contents of the trust
- When you hope to lower your estate taxes since trust protectors can modify trusts and ensure assets are not accidentally included in your estate
You might also decide to assign a trust protector when you hope to maintain your privacy. Your trust protector can help your family avoid bringing your estate to probate court. The last thing you want is to become publicly embarrassed by the details of your estate, including beneficiaries and financial details.
In the event you want to ensure your immediate successor trustee does not have too much power, assigning a trust protector may be well advised. Suppose the assigned trustee does not have any knowledge, experience, tools, or availability to properly handle the administration of your trust. In that case, your trust protector can step in and ensure the details are handled as you have instructed.
Who Doesn’t Need a Trust Protector?
There is no legal requirement in place that states you need to assign a trust protector. In fact, many estate attorneys do not even give you the opportunity to assign one. This is, in part, because not every estate requires a trust protector. However, your personal instructions and the contents of your trust will have an impact on whether assigning a trust protector is a good fit for you.
If you are not leaving any of the assets within your trust to be distributed to beneficiaries, there is no real need for a trust. Trust protectors are designed to handle the unexpected. Assigning one carries minimal disadvantages and can help protect your trust should it become necessary to do so.
If you are still unsure whether assigning a trust protector is something you should consider, be sure to discuss your concerns and further detail with your Missouri trust attorney.
Who Should Be Your Trust Protector?
It is difficult to say who should be selected as your trust protector. In theory, you can select anyone of your choosing, from close friends, to CPAs, your trust attorney, your financial advisor, or other professional co-trustees. However, it is important to select a trust protector who you can rely on without a doubt to ensure your instructions are carried out and protect your estate at all costs.
Your trust protector has a significant amount of power when it comes to the administration of your trust. Although your immediate successor trustee is responsible for handling your trust, your trust protector has the authority to step in and make changes where they see fit or have concerns.
Generally, those working through their estate plans will opt to select their trust attorney who has drafted their estate plans to act as the protector of their trust. Under the law, you must select a trust protector who:
- Is a third party to the trust, which means they are not a beneficiary, trustee, or grantor
- Is capable of handling the responsibilities and functions of a trust protector
- Is not related to the trust grantor
- Is not a subordinate of the grantor
How to Choose Your Trust Protector
When selecting your trust protector, there are specific conditions you should consider, including:
- Your trust protector will have a significant amount of power over your trust
- Your trust protector should understand their responsibilities and duties
- Your trust protector may be treated as the trustee
- Your trust protector should have the availability to handle your trust
- Your trust protector should be capable of handling your trust physically and emotionally
- Your trust protector should have the resources to obtain the help they need to make an educated decision
- Your trust protector should be prepared to monitor the trustee’s actions
- Your trust protector will not be held liable for failing to monitor trustees
- Your trustee will be responsible for handling tasks the grantor is incapable of doing
- Your trust protector must follow the grantor’s intent at all times
- Your trust protector has the power to limit the trustee’s power
- Your trust protector can add or eliminate beneficiaries to the trust
- Your trust protector should be prepared to support or manage the trustee at all times
Essentially, you need to choose a trust protector who has the knowledge, experience, availability, and impartiality needed to ensure your instructions are followed and your desires are carried out should you become incapacitated or otherwise incapable of doing so.
Get in Touch With a Trust Attorney in Missouri Today
Choosing the right trust protector is one of the most important decisions you can make as you set up your trusts and finalize your state plans.
If you are interested in finding out more about whether a trust protector is a good fit for your estate plans, you can get answers by contacting an experienced Missouri trust attorney at David S. Schleiffarth, LLC. Schedule your confidential consultation as soon as today. You can reach us through our secured contact form or by phone to get started.