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Assets, Wills, Businesses, and Estates

Introducing: the Trust Protector.

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Trust Protectors can clean up substance abuse situations. Changes in families. Unexpected health care issues. Anything else which was impossible to anticipate when the words hit the paper and the trust was created.

You can provide for Trust Protectors in virtually any kind of trust: revocable trusts, living trusts, irrevocable trusts, insurance trusts, credit shelter trusts, marital trusts, QTIP trusts, elder care trusts, special needs trusts, et al.

And having the Trust Protector solution has nothing whatsoever to do with estate taxes.What is this thing?

“Trust Protector” is actually a title for someone who’s going to solve a problem in a trust without the trustee or beneficiaries having to go to court to get it done. You save legal fees, filing fees, court calendars, presenting evidence and more. Trust Protector opens the door to updating a trust to fit what’s really happened since it was signed.

Stop a substance abuse problem from getting worse. Example: a Trust was drafted to ultimately benefit grandchildren. They get their share of what’s left in the Trust when each turns 21. Makes sense, and it’s a common pattern.

But what if one of the grandchildren has a drug problem? The Trustee is between the proverbial rock and a hard place. The Trustee has a strong legal duty to do what’s best for the grandchild, and a duty to abide by the trust’s specific terms.

So does the Trustee give the grandchild her share, obeying the Trust terms but knowing it’s a waste of money and probably dangerous? Or does the Trustee go against the Trust terms and flat-out refuse to give that beneficiary what she’s supposed to get?

In the old days (i.e., pre-Trust Protector), the Trustee would file a lawsuit, explain the circumstances, and ask the court to let the Trustee do something other than make that distribution to that 21-year-old grandchild. But how long is this going to take? And of course, there’s the financial and emotional burden.

However, if the trust contains Trust Protector terms, the Trustee can appoint anybody – a lawyer, accountant, doctor, or someone else – to amend the Trust terms to fit the situation. Without going to court.

The person selected can get input from the trustee, the family, the healthcare providers, and from anyone else who’s concerned with that beneficiary’s well-being.

The Trust Protector can then shape a solution. Should the distribution get delayed until the grandchild tests drug-clean? Should the Trustee be able to dip into that beneficiary’s share to pay for treatment? Should the Trustee pay something each month to allow that grandchild to rent a place and pay for food?

Once the decision is made, the Trust Protector writes it up and it goes into effect. And that’s that.
Other situations.

  • A trust says that after the spouse has died, the children only get income, and when they’re all gone, the grandchildren get all that’s left. It’s great generation-skipping strategy. But it doesn’t do anything because given the size of the assets, there’s no reason not to give everything to the children, and let them judge what they need, let them take care of their children, etc.
  • The Trustee needs to be changed. The named person was the logical choice once upon a time. But now there’s a question of the Trustee’s mental capacity.
  • A beneficiary is living in the house and the Trust says the house needs to be sold. But nobody wants that to happen, despite what the Trust says.

Now authorizing Trust Protector powers takes some very specific, careful drafting. There’s no one-size-fits-all. Nothing to download that’s safe.

And using Trust Protector powers is not a blank check to do anything: the Trust Protector’s ultimate goal is to divine how the donor – the person who created the trust – would have handled the situation.
Of course, sometimes a trust can’t be amended. It all depends. But sometimes, even irrevocable trusts can be updated.

Trust Protector can apply to trusts you’ve drafted in a will or elsewhere, but haven’t started operating yet. And Trust Protector can frequently be used for trusts that are already operating. But someone who knows the trust landscape should see what your opportunities are.
It’s worth taking a look if there’s a trust in your past, present or future.

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