Trust Protector Role
What is it?
A Trust Protector is an independent party (not the grantor, trustee, or beneficiary) given special powers to oversee the trust and make changes the grantor cannot. This role originated in offshore trusts but is now common in domestic planning. The Trust Protector provides flexibility in an otherwise rigid irrevocable structure, allowing adaptation to changing laws, circumstances, or family situations.
Why is it important?
A Trust Protector can: remove and replace trustees who aren't performing well, modify administrative provisions to adapt to new tax laws, change trust situs (location) to a more favorable state, add or remove beneficiaries in certain circumstances, convert between grantor and non-grantor trust status, terminate the trust if it becomes impractical, and resolve disputes between trustees and beneficiaries. This provides a crucial safety valve.
Example Language
The Trust Protector shall have the following powers, exercisable in the Trust Protector's sole discretion: (a) remove any Trustee and appoint a successor; (b) modify administrative provisions; (c) change governing law and trust situs; (d) add charitable beneficiaries; (e) adjust distribution standards; (f) appoint a successor Trust Protector. The Trust Protector shall not be a beneficiary and shall have no beneficial interest in the Trust.