Many people who create irrevocable trusts are uncomfortable giving up control of their assets to a trustee, especially a corporate trustee. Even if the trustee is a trusted individual, it is increasingly likely that the trust could last for many years. As a result, the trustee may experience changes in the law that could negatively impact carrying out the settlor’s intent. The following Q&A addresses ways to mitigate concern with a long-lasting irrevocable trust by using a trust protector.

What is a trust protector?

A trust protector is a third party who is granted certain powers under a trust instrument to ensure that a settlor’s wishes are effectively carried out. The use of a trust protector may avoid expensive and drawn-out court proceedings.

What powers may be given to a trust protector?

The person who creates the trust is able to select the powers he or she wants a trust protector to hold. These include but are not limited to:

• the power to remove and replace a trustee;
• the power to direct, consent or veto investment decisions;
• the power to modify a trust in response to changes in tax laws or state law;
• the power to modify the trust to change the tax status of the trust;
• the power to modify a trust to change the governing law; and/or
• the power to modify the trust to deal with changes with respect to trust assets.

Who can be a trust protector?

The selection of a trust protector depends on the powers appointed to the role. In some circumstances, a person may wish to select a trust protector with special skills, knowledge or experience. In other circumstances, he or she may wish to select a trust protector who knows the family or the trust’s beneficiaries, such as a trusted advisor or friend. It may also be beneficial to appoint a committee to serve as trust protector. However, to avoid adverse tax consequences, the trust protector should generally not be someone who already has an interest in the trust, including, but not limited to, the settlor, anyone else who may contribute property to the trust, or a beneficiary of the trust.

Are trust protectors subject to fiduciary duties?

State law determines whether a trust protector will be required to act in a fiduciary capacity. Missouri law, by default, generally deems the trust protector to have a fiduciary duty to the trust beneficiaries. However, like many states, Missouri allows a settlor to override the presumption of a fiduciary relationship through the trust instrument.

If you have questions about using a trust protector or adding one to your existing trust, please contact an attorney in our Trusts & Estates Practice Group.