Trust Protectors to Limit Trust Litigation

The trust process is typically pretty straightforward. You have a settlor who created the trust, a trustee that administers a trust, and beneficiaries that benefit from the trust. However, over recent years, there has become a new person in the process – the protector.

The protector of a trust is very much how it sounds, they protect your trust for the beneficiaries. A trust protector can have as many or as few powers over the trust as you feel comfortable, but their job is to make sure that the trustee is acting in the best interests of your beneficiaries.

Of course, you may wonder if you need a trust protector if the whole point of appointing a trustee is that you can trust them. Trust protectors are extremely common for very large trusts, but even your most standard trust – the living trust – can benefit from it. In the living trust, while the settlor is alive, they are both settlor and beneficiary. This means that if the trustee is acting not in their best interests, as the settlor, they can remove them. However, the issue comes after the settlor passes away.

In this case, rarely do you need to worry about a trustee fleeing with thousands of embezzled dollars into the night, but rather that they start to milk the trust. This means they start litigation with the beneficiaries that accrue fees that can be reimbursed from the trust, overbilling and filling their own pockets. In this case, the protector would be able to step in, fire the trustee, and in some cases, appoint another trustee.

In a world where “trust” can be such an unclear thing, a trust protector is just another layer you can add to your trust to protect those that would benefit from it. While not required, you may want to consider one as a “just in case” measure.

If you are interested in starting an estate plan, including creating a trust, contact us today.