Are you wondering, “What is a protector in a trust?” Then you’ve come to the right place. A protector in a trust is like the castle guard above. The protector is able to take certain actions when the creator of the trust is unable to act. Put another way, the protector helps carry out the trust creator’s wishes.
Why is a Protector in a Trust Used?
Trusts are legal documents that allow people to manage assets and property for future generations. Families use trusts to avoid probate when someone dies,. A family could also use a trust as a way to to distribute money among family members.
If a trust becomes irrevocable, that means the creator of the trust can no longer make a change to it. Sometimes a person sets up a trust to be irrevocable from the beginning. Others become irrevocable later. For example, a revocable living trust can become irrevocable once the creator of the trust dies or no longer has mental capacity to sign legal documents.
If your trust has become irrevocable, there are two ways to make a change. First, the trustee can “decant” the trust. The other is for the protector in a trust to make the change.
Decanting a trust is complicated and may require going to court.
Decanting means to transfer the trust assets from one trust to another. The process of decanting a trust is controlled by state law. Sometimes it can be done without going to court. But sometimes the trustee needs to go to court.
Having protector in a trust make the change is usually simpler.
The other way of changing an irrevocable trust is to request a protector in a trust to do it. However, the protector in a trust can only make changes that original trust document permits.
A protector in a trust can make changes that may be needed in the future. Common examples of changes that a protector in a trust can make include:
- Removing and replacing a trustee.
- Changing a beneficiary’s right to receive trust benefits.
- Changing the trust document
Removing and Replacing a Trustee.
If you die or become incapacitated, your successor trustee takes over. And if that trustee mismanages the trust, you can’t remove them. (The trust became irrevocable as soon as you died or became incapacitated.) That’s why it’s good to have a trust protector who can step in and take action on your behalf.
For example, a protector in a trust can remove and replace the trustee. This is probably the most common reason for a trust protector to become involved in your trust.
Changing a beneficiary’s right to receive trust benefits.
Here are some reasons that it might make sense to change a beneficiary’s right to the trust. One of your heirs could develop a drug or alcohol addiction. If they receive money from the trust, that will probably only serve to enable their unhealthy behaviors. It may make sense to rewrite the trust to account for this situation.
Also, a beneficiary could become disable and become eligible for government benefits. If the trust requires payments to go directly to the beneficiary, they could simply lose their benefits for a period of time, and then have to go back on government assistance. The trust could be reworded to work around this issue. Then the trustee could distribute cash in a way that does not disqualify the beneficiary from the government benefits.
These are just a couple of examples. There are countless reasons that it might make sense later to change a beneficiary’s right to trust benefits.
The trust document may need to be changed.
There may be a change in the tax law that requires a change to the trust. The trustee or beneficiaries might move to another state, or even to another country. In that case, it makes sense to change the law that applies to the trust. The protector in a trust can do this. Again, this is just an example. There are countless reasons for needing to change a trust in the future. As a general rule, it’s best to maintain flexibility to account for unexpected future changes.
Want To Learn More About What Is A Protector In A Trust?
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