5th Aug 2014

Husband and wife set up a trust that benefits the survivor and then at the second death pays to their three children at ages 25, 30 and 35. They carefully consider their choices for successor trustee and decide on wife’s brother, the CPA. Good thing they had taken the steps they did because husband and wife are deceased before anyone expected leaving behind minor children. Wife’s brother is up to the challenges of managing a long term trust. Their planning is solid, but now that the grantors are deceased; circumstances change. Ten years later, wife’s brother is having personal financial difficulties and starts thinking, well the trust could just loan me a bit to get past my problems. One of the kids is turning out to be very responsible and doing a joint BS/MS program in electrical engineering. The middle child is taking his time growing up, skips out of high school classes, won’t think about a summer job, and constantly demands money from the trustee, etc. It is looking like even 1/3 at age 25 may be too soon for him. The youngest child became blind and has developmental difficulties due to a genetic disease that became apparent after the parents were deceased. The child turns 18 in several years and relies on government based benefits. The trust has special needs trust provisions in it based on the rules when the trust was created. However, the laws recently changed and the special needs provisions may need some updating to be sure there is compliance. There are several issues here. The trustee needs someone looking over their shoulder, irresponsible kid may need to have things kept in trust longer, and the special needs trust may need additional or changed provisions to protect the disabled child.

A trust protector can be used in a variety of capacities but the main two are to be oversight on the trustee and reform the trust for needed changes in circumstances be those created by the beneficiaries or changes in law. The trust protector gets regular reports from the trustee and has the right to inspect records. Some allow the trust protector to fire the trustee and choose a new independent trustee. The trust protector can also be empowered to make some changes to the trust, such as lengthening distribution periods or having the trust updated for changes in the law. While these goals can be met in other ways, uniform trust code reformations, or actions to remove the trustee by the beneficiaries or guardians acting on their behalf, these actions usually require some court involvement which can be expensive and lengthy. Appointing a trust protector can help smooth over these future events.

Who should you nominate in this role? The best trust protector is someone who knows your wishes and the needs of your family, but won’t be partial to one family member over another, such as a family friend or family attorney. There are some institutions for the disabled who will serve as trust protectors for trusts involving disabled family members as well. Consider how much authority you wish to grant to your trust protector and seek advice from your legal counselor as to who will best fulfill this role.

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