Trustees are a special kind of hero to the trusts and the families they oversee, and that’s a tough gig as many will know. Nevertheless, some problems call for superheroes. In the context of some trusts, some problems call for “trust protectors.”
The idea got some recent limelight from Barrons, and this article here, but we, at Schultz & Associates Law Center, P.C., an Oregon Law Firm which focuses on estate planning and estate administration, have been successfully using trust protectors for about 8 years. A trust protector may be useful when a change needs to be made to the trust and you’re no longer able, or even alive, to make the needed change. A trustee has the power to uphold the document as it was written, but getting something modified might involve petitioning for a court order which can be expensive and time consuming. A trust protector, on the other hand, has broad powers to change the trust as they see fit but always in the name of the greater good that is the intentions of the drafter.
That might mean overriding debate among parties to the trusts, moving the trust from state to state, terminating the trusts, removing a non compliant Trustee, and a host of other possible superpowers. This gives a definite flexibility to your trust arrangement, especially if you are creating an irrevocable trust or something as long lasting as an actual dynasty trust. The benefits are obvious.
On the other hand, as the Trustmaker, it can be a difficult thing because it means entrusting all of your own powers to someone else. In order to stay away from some additional tax issues, the trust protector should be an unrelated, uninterested, third party. Usually this means that an attorney or CPA is selected to act as trust protector. Sometimes, and a lot of our clients choose this option, a trust protector can be chosen later by your Trustees. In most circumstances, the trust protector may not ever come into play. But, it’s nice knowing that changes to your trust can be easily made if laws or circumstances change after you become unable to make those changes yourself, without the involvement of the court.
Not all states have laws that allow for trust protectors. Oregon’s Uniform Trust Code (OUTC), found in ORS 130 and which took effect in 2006, provides for trust protectors in ORS 130.685. Some Oregon practitioners have been using trust protectors since before the OUTC was put in place and they are becoming common place in Oregon Continuing Legal Education (CLE) courses.
In the end, the drafting of any trust beyond the fill-in-the-blanks, bare-boned kind, will require a skilled attorney well versed in trust law, and so too with a trust that empowers a so-called “trust protector,” if not evn more so.
Reference: Barron’s (March 3, 2012) “Why You May Need A ‘Trust Protector’"