What Is a Trust Protector?

Definition & Examples of a Trust Protector

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A trust protector is an independent third party or institution with the authority to perform certain duties concerning a trust. The trust agreement typically details the trust protector's responsibilities and areas of authority.

Learn who can serve as a trust protector, what they can do, and when it is important to appoint one.

What Is a Trust Protector?

A trust protector is an independent party who takes on the job of ensuring that the wishes of the settlor—the individual who made the trust—are fulfilled and that the trust continues to serve the purpose for which it was intended. They are sometimes seen as being a check on the power of trustees.

A trust protector does not always have a clear definition to differentiate it from other roles. The term is sometimes used interchangeably with a trust advisor.

Unlike a trust advisor or a trustee, however, a trust protector may not be required to act in a fiduciary role. In some states, a trust protector is required to act as a fiduciary when taking certain actions but not others. In other states, a trust protector is expected to act as a fiduciary at all times.

Usually, a trust advisor may advise trustees or beneficiaries but cannot take action to change the trust.

Trust protectors should be completely independent of the trust and the people who set it up. They should not be related to the settlor, any of the trustees, or any trust beneficiaries. 

Sometimes the trust agreement will name a specific trust protector. Other times, it might lay out the process by which a trust protector can be appointed. If the settlor is married, their spouse may be granted the power to appoint a trust protector.

If the trust agreement names a specific individual, the document should also specify how that initial person should be replaced if they are unable or unwilling to serve in that capacity.

Long-term trusts in particular will need to include provisions for replacing a trust protector, as it is likely that the trust itself will outlive its original appointees.

If the trust agreement does not specify a trust protector or give instructions for choosing someone, the trust beneficiaries can nominate one. This person must then be appointed by the court. A trust protector can be added to a trust after it is created.

A trust protector is entitled to compensation for the services they render on behalf of the trustees and beneficiaries, including reimbursement for legal or court fees. The trust agreement should set forth the method for determining how much and when they are paid.

How Does a Trust Protector Work?

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 settlor of an irrevocable trust cannot later undo it or take back the property placed into it. In the case of an emergency, only a trust protector can step in and take action to make things right.

When and whether a trust protector can act depends on their powers. The trust protector may be granted limited or expansive powers, including:

  • Removing and replacing the existing trustees
  • Settling disputes among co-trustees, or between trustees and beneficiaries
  • Altering trust provisions due to changes in the economy or tax laws
  • Terminating the trust entirely
  • Modifying the powers of trustees
  • Correcting ambiguities or errors made when the trust was drafted

The powers and responsibilities of a trust protector should be included in the provisions of the trust when it is drawn up.

State laws about the roles and duties of a trust protector vary widely, including whether or not the trust protector has a fiduciary duty to the trust or its beneficiaries. Because of this, a trust protector's duties and responsibilities should be carefully spelled out.

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 but gives the trust protector broader and less controlled powers that may not be in the best interests of the beneficiaries.

Do I Need a Trust Protector?

Long-term trusts, such as dynasty trusts, that can continue for many years after being set up benefit from having a trust protector.

Longer timelines increase the possibility of situations arising that would require changes to ensure the trust can continue to survive and function as it was intended. Long-term trusts are also more likely to go through multiple participants, which increases the likelihood of disputes over the function and execution of the trust's provisions.

In these cases, having a trust protector can help ensure that the trust continues to function as it was intended despite changes in trustees, beneficiaries, laws, taxes, the economy, and more.

If you are in the process of creating a trust, talk with your lawyer about whether or not you will need a trust protector and how to define their responsibilities.

Key Takeaways

  • A trust protector is an independent third party or institution with the authority to perform certain duties concerning a trust.
  • They cannot be related to the settlor, any of the trustees, or any beneficiaries.
  • The trust protector must ensure that the wishes of the trust maker are fulfilled and that the trust continues to serve the purpose for which it was intended.
  • Trust protectors may need to take action to comply with new laws, deal with large economic changes, or settle disputes between trustees and beneficiaries.
  • A trust protector is not always bound by a fiduciary duty.