Trust Protector Definition and Role

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A trust protector is an independent third party or institution given the authority to perform certain duties with regard to a trust.

A trust protector's role is to ensure that the wishes of the trustmaker—the individual who made the trust—are fulfilled and that the trust continues to serve the purpose for which it was intended. The trust agreement typically details his responsibilities and his areas of authority. 

Who May Serve as a Trust Protector

As an independent third party, the trust protector cannot be related to the trustmaker or to any of the trustees or trust beneficiaries. Sometimes the trust agreement—the trust's formation documents—will specifically name a trust protector, but it might instead just lay out the process by which a trust protector can be appointed instead. If the trustmaker is married, his spouse may be granted the power to appoint someone.

Otherwise, the trust beneficiaries can nominate someone and the court can appoint that individual. If the trust agreement names a specific individual, the document should also specify how he should be replaced if the initial individual is unable or unwilling to serve when called to action.

The Powers the Trust Protector Can Exercise

A trust protector is most commonly associated with irrevocable living trusts. For all practical purposes, the terms of these trusts are set in stone. The trustmaker of an irrevocable trust cannot later undo it or take back property he placed into it.

In the case of an emergency—such as if something happens so the trust can no longer serve the purpose for which it was intended, or if changes in the economy cause it to lose money at an alarming rate as it's presently set up—only a trust protector can step in and take action to make things right. The trustmaker has relinquished all control, so he's personally powerless to remedy the situation. 

The trust protector may be granted limited or an expansive list of powers. At a minimum, he should be able to remove and replace the existing trustees. He may be given the power to settle disputes among co-trustees, or between trustees and beneficiaries. He may be permitted to alter trust provisions due to unanticipated circumstances, such as changes in the economy or with tax laws.

This power is critical for dynasty trusts that can continue for many years into the future after being set up. He may be able to terminate the trust entirely, to modify the powers of the trustee, to change the situs or legal jurisdiction of the trust, or to correct ambiguities or errors made when the trust was drafted.

Under the laws of some states, the trust protector will be able to exercise these powers without the need for court approval. This can minimize the costs incurred in administering the trust.

Paying the Trust Protector 

A trust protector is entitled to compensation for the services he renders on behalf of the trustees and beneficiaries. The trust agreement should set forth the method for determining how much he is paid.