Trust protectors are gaining popularity to help guard over assets. While there are many reasons to have a trust protector, the most common motivation is to help deal with an untrustworthy trustee. Should that ever happen, then a protector is surely the way to go. To help you better understand what a trust protector is and what they do, read on.
What is a Trust Protector?
To understand trust protectors, you need to first understand what a trustee is and how they differentiate. Trustees are responsible for managing the assets that are held in trust. Trust protectors on the other hand, are a third-party individual or group – someone who is separate from the trustee who exerts influence on how a trust is administered, and also checks on the actions of the trustee. They are hired by the person who created the trust, otherwise known as the settlor.
The trust protector maintains a fiduciary responsibility to that of the trust and acts in the best interest of the beneficiary. This person can also have the power to appoint and replace trustees, as well as remove trustees in case of misconduct.
What are the Added Benefits?
Beyond appointing and replacing, the protector also can serve as a mediator between trustees and beneficiaries. They can also veto questionable investment decisions, address any challenges to the trust such as tax or legal challenges, monitor changes to legislature and ensure the trustee is in compliance, and generally act to ensure trustees are doing their job.
How Do You Choose a Protector?
First and foremost, a protector should be someone you trust. Protectors need to understand your business goals including what their involvement will be in the process. Family businesses may prefer to choose a family member who understands the business in great detail – this can be beneficial as one can avoid paying fees, but on the other hand there may also be tax restrictions.
If the business is more complex in nature one may wish to appoint a professional, such as a tax advisor, trust company, or even an advisory board. Depending on the business structure you may also want to engage with an international expert that is located close to the place of business if you have an offshore trust or a company that operates in other regions.
In summary, the protector is a way to safeguard your trust from trustee misconduct. If you own a trust and would like an extra layer of protection then a protector may just be the way to go to safeguard your assets and give you some peace of mind.