When discussing trust plans with clients, a common concern is what happens if laws or circumstances change that will cause the trust not to work as planned.
Many times, I will discuss using a trust protector to address this concern.
The purpose of a trust protector is to name someone, or a group of people, who will have the power to act to make sure your trust works as you planned. The trust protector may have powers to assist and advise the trustee, make changes to the trust terms and remove and appoint a trustee.
Any individual, or group of individuals, could be chosen as the trust protector. Often clients will choose family members or an accountant, attorney, financial adviser, banker or other professional to take on this role. I recommend that the chosen person or persons have understanding of tax and trust laws and be familiar with the changes that may affect the trust.
Additionally, the trust protector should be knowledgeable of how you intend your trust to work. This may require a personal knowledge of your family, the beneficiaries and circumstances of the trust.
Under Minnesota statute, the trust protector may take the following actions:
- Make changes to trust that alter the trust’s tax status.
- Modify the trust to address changes in the law or tax rules.
- Change the interest of a trust beneficiary.
- Modify a beneficiary’s power to direct assets to future beneficiaries; however, they are not able to modify in a way that would include new beneficiaries.
- Remove, or appoint, a trustee or other advisers to the trust.
- Terminate the trust.
- Change the location of the trust and the governing law of the trust.
- Appoint successor trust protectors.
- Interpret the terms of the trust instrument for the trustee.
- Advise the trustee on how to administer the trust.
- Amend or modify the trust for the purpose of taking advantage of laws that regulate restrictions on the sale or transfer of the trust property; changing the distribution of trust property; or improving the administration of the trust.
- Veto and direct trust distributions.
- Provide direction to the trustee on notifying the beneficiary regarding the trust terms.
You can have the trust protector provision drafted to include all or none of these powers. The bottom line: The purpose is to provide flexibility, so you are sure your trust plan will happen as intended.
Balzarini is an attorney at law with Miller Legal Strategic Planning Centers, a Division of Hellmuth & Johnson. Email your questions and comments to him at [email protected].