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'Trust protector' may be new trend to preserve assets

As many Florida residents may know, the use of trusts in estate planning has become a relatively common practice. Trusts are a useful way of avoiding probate and attempting to ensure that assets are distributed according to one's wishes. Trusts can also protect assets from waste by a financially irresponsible beneficiary.

Of course, to create a trust one needs to appoint a trustee. Ideally, the trustee is someone the grantor will trust implicitly to follow the letter of the trust documents as well as the "spirit" in which a trust is created. Unfortunately, sometimes circumstances change, people have disagreements, and trustees are, after all, only human. What happens if, after a grantor's death, a trustee decides a beneficiary should not get certain assets? What if estate laws change to make the trust less efficient at avoiding taxation?

There is a growing use of individuals called "trust protectors" to make certain that a trust continues to do what its creator intended, even if it is irrevocable or the grantor is deceased. By appointing a trust protector, a grantor can give that person the power to oversee investment decisions or to make slight changes to trust documents if the law changes. While such positions have seen frequent use in the past for offshore trusts, they are becoming increasing common in domestic trusts. They are often used for irrevocable trusts which the grantor can't change, inter-generational legacy trusts to add later-born grandchildren and in special needs trusts to monitor changes in law and regulations regarding benefits.

Because the position of trust protector is relatively new in many cases, there are generally few state regulations or statutes with regard to their duties and powers. Due to this situation, it is especially important for anyone considering utilizing a trust protector to get the right information to ensure that the protector's role is clearly and legally specified. The protector could be just an advisor for the trustee, or be given fairly extensive powers to make changes, including removal of the trustee. It is imperative that a grantor think through all the potential consequences of the appointment of a trust protector.

Source: New York Times, "Guardians of Trusts," John F. Wasik, March 12, 2014

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