Attorney as Trust Protector

An important element in the design of Dynasty, Asset Protection and other complex Trusts is the selection and appointment of the Trust Protector. The unique role of the Trust Protector is to oversee the workings of the trust, and to act when necessary to accomplish the goals of the Grantor and protect the interests of the trust beneficiaries. In addition to overseeing the activities of the trustee, the Trust Protector can also be given powers to change trust terms, which are especially important in Dynasty Trusts to allow modification to the trust document as circumstances change over time.

Powers of the Trust Protector:

The powers of the Trust Protector are designed in the trust agreement to be as broad or as narrow as the Grantor of the trust desires. The following provides several examples of the more commonly used powers that can be drafted into the trust agreement:

  • The power to amend the trust terms to reflect changes in tax law
  • The power to amend the trust terms to change the dispositive provisions 
  • The power to remove and replace trustees 
  • The power to change the trust situs or the governing law 
  • The power to approve accountings 
  • The power to grant a power of appointment to a trust beneficiary 
  • The power to remove, replace or add beneficiaries (including the Grantor)

In creating a Delaware trust, utilizing Trust Protector powers gives tremendous flexibility. Careful consideration must be given, however, to what powers are granted, and who will hold powers, as the choices can have serious tax implications. In Delaware, it is possible to have more than one Trust Protector, and to delegate powers as appropriate, giving the creator of the trust even greater control. While the Grantor may want to appoint a family member, such as a spouse or child to this role, there are compelling reasons why family members should not be appointed. Foremost is that if the family member is also a beneficiary of the trust, giving too much power in the role of trust protector can jeopardize the asset protection afforded by the trust, or cause the assets to be included in the client's or the family member's estate. Therefore, the use of a trusted advisor, such as an attorney or accountant, or other independent person, is often the best choice for the role of trust protector.

As a member of Advocates Trust Group you have access to a Delaware Series Limited Liability Company designed specifically for ATG members to serve as Trust Protector for your clients' Trusts. The Operating Agreement for your Series LLC is drafted for you, and provided to you as a benefit of your membership in Advocates Trust Group. The only decisions you will have to make will be to customize your SBU and decide who will be the members (usually the members of your law firm) and who will be the manager of your series (generally one of the members of your law firm). When your clients decide to select you or your firm as the Trust Protector, they will name your new Delaware Company, thereby avoiding any potential tax implications.

You can also take advantage of the Professional Advocates Lifetime Maintenance System (PALMS) to help facilitate your role as Trust Protector efficiently and effectively. PALMS organizes your client's legal and financial information in a secure document vault. It allows you and the client to share this information with the necessary parties and other trusted advisors.

Learn More About Advocates Trust Protectors - Members Resource