When establishing a trust, many of our clients ask “What steps can we take to help protect our estate even after we are gone?” We often advise our clients to include a trust protector as part of their trusts.
The role of trust protector is different from that of a trustee. Representing the long-term intentions of you as the grantor, the trust protector can make changes to your trust to ensure your goals are met. When circumstances change that impose new adverse consequences, or when new opportunities emerge than can benefit those in the trust, it is better to have a trust with built in ability to allow adjustments.
For example, recent changes in the tax laws have made some beneficiaries pay more in income tax. A trust protector can overcome this problem by having an attorney add language to the trust and that flexibility can reduce the overall tax liability. Without a trust protector, a costly court case may have to be opened and judicial modification requested.
We always recommend a trust protector be named in a supplemental needs trust. These types of trusts must often times be sent to the Social Security Administration or other administrative bodies for review. If disqualification of means-based government benefits occurs because of an issue with the supplemental needs trust, the Trust Protector can fix the issue and ensure government benefits are restored retroactively.
Your trust will dictate the trust protector’s powers. Here are some powers that a trust protector is typically given:
- Allow the trust to be amended due to changes in the law
- Change the governing law and state of administration
- Receive annual accountings
- Construe the terms of the trust
- Remove and replace a trustee
You decide who to name as the trust protector in your trust; however, you can’t name yourself, your spouse, your children or your siblings as your trust protector because of numerous income tax and estate tax issues. You may decide to name a specific individual who is not related or subordinate to you. However, because many people do not have someone in mind who understands the roles and responsibilities of a trust protector, many people name their attorney as the trust protector or state that their attorney may appoint a trust protector when one is needed.
Remember, we are here to help, so if you have questions about designating a trust protector for your trust, please let us know.
