“Captain Trust Protector” Illustration by M. Collins
The words “Trust Protector” conjures images of a person who swoops in to rescue a beneficiary in distress from an om onus trustee. However in reality, it’s the trustee that relies most frequently on the protector.
The protector is usually a close friend or associate of the settlor who has an intimate understanding of the family’s dynamics. More importantly, the protector provides a means by which the trustee can add further value to the administration of the trust. E.g. If a protector has not been appointed, the trustee is significantly deprived due to its inability to vary the trust so that it mirrors the current objectives of the beneficiaries.
In the absence of a protector, the trustee is usually compelled to seek direction from the courts. This process is not only time consuming but expensive and provides no guarantee that a decision will be made in favour of the beneficiaries.
The discretionary powers that are frequently subject to the protector’s consent are as follows:
- Trusts of Income & Capital
- Power of Appointment
- Power to Transfer to Other Trusts
- Power to Vary the Terms of the Trust
- Addition to the Class of Beneficiaries
- Exclusion from the Class of Beneficiaries
- Power to Change Governing Law
- Power to Vary the Trust Period
- Removal and Appointment of the Trustee
For settlors domiciled in civil law jurisdictions, the notion of an irrevocable trust proves difficult to conceptualize. The ability to appoint a close family friend as protector is frequently the compelling feature that closes “the deal” on an Asset Protection Trust (APT).
With a protector appointed, the settlor receives the tax and succession benefits of a discretionary trust, as well as the flexibility of a directed trust. These attributes make the trust protector a fundamental component of the modern trust instrument.
Have you appointed a protector for your directed trust in the event of disability or death? Has your asset protection trust been difficult to administer because a protector has not been appointed?
