If you have established a revocable living trust or irrevocable trust, you may have seen language in your documents referencing a Trust Protector or Trust Advisor. A Trust Protector, aka a Trust Advisor, is an individual or company who is given special powers within the trust document. These powers might include the ability to remove or appoint trustees, change what state law the trust document is interpreted under, correct errors or ambiguities within the document, or request accountings from the trustee.
In some instances, we might even give the Trust Protector the power to add or remove beneficiaries from the trust. This may sound like a lot of power to give to an individual or company, but we recommend adding a Trust Protector provision to your documents if they do not already include one. Here are 5 reasons why it can be a good idea to include a Trust Protector provision in your documents.
1. A revocable living trust may later become an irrevocable trust.
A Trust Protector provision is usually intended for an irrevocable trust, but if you currently have a revocable living trust, we still recommend adding a Trust Protector provision to your trust. A revocable living trust will become an irrevocable trust upon your incapacitation or death, so it is important to include the Trust Protector provision from the beginning as we never know when your revocable living trust will become an irrevocable trust.
2. Laws change over time.
Laws regarding trusts can change over time such that the trust documents need to be updated to reflect the new laws. For example, we had a major law change in 2020 that impacted inherited retirement plans, and some of our clients had to update their trust documents. If they had been incapacitated, then they would have been unable to make those changes, but during a period of incapacity, a Trust Protector can step in and make those changes when needed.
3. Family circumstances can change over time.
Perhaps the person that you originally named as trustee has failed to perform their duties as required and needs to be replaced as soon as possible. When you have a Trust Protector provision in your documents, that Trust Protector can easily step in and remove that trustee so that your trust assets remain protected.
4. The likelihood of future court involvement is reduced.
If an issue ever arose with your trust, a Trust Protector could step in to assess the situation versus a court having to immediately step in.
For example, if a beneficiary believes that a trustee may be misappropriating or mishandling the trust assets, the beneficiary could ask the Trust Protector to request and review an accounting before seeking court involvement. The Trust Protector can effectively act as a mediator between the trustee(s) and beneficiaries to resolve any potential conflicts that might arise without needing to go to court.
5. Your privacy is further protected.
When you create a trust, you are helping keep your information private, but if there is a dispute over the trust that has to go to court, then an element of that privacy you created could be lost. However, when a Trust Protector provision is in place, that Trust Protector can help prevent court involvement and thus keep that privacy you created with your trust in place.
Who should serve as my Trust Protector?
Fortunately, most families never have to call upon a Trust Protector, but by having the provision in place, that added level of protection is there if you were to ever need it. The role of Trust Protector frequently requires a solid understanding of trust law and tax laws, so it is usually best to appoint a professional or company to serve in this role.
Frequently for our clients, we may not designate a specific Trust Protector today, but instead, we include provisions for who can appoint a Trust Protector if one is ever needed. Given that we work directly with our clients, know what they are hoping to accomplish with their plans, and have the insight to understand the legal knowledge and skills that may be required, we are in a great position to select a Trust Protector based on the client’s specific circumstances that have arisen.
If you have an existing trust and would like to see if your current documents include a Trust Protector provision or would like to establish a trust for the first time, please give our office a call at 919-443-3035 or visit our website to schedule a needs assessment call.