What is a Trust Protector?

A trust protector is a person or entity other than the trustee or trust grantor that has certain powers over a trust. Trust protectors are also referred to as “power holders” under North Carolina law.

Trust protectors can provide a system of checks and balances for your trust. If you don’t want your trustee to have absolute discretion over certain matters, the trust protector can advise or overrule the trustee’s decisions.

Powers of a Trust Protector

Trust protectors can be given many different powers by the trust documents. One of the most important duties is the power to remove and appoint trustees. The trust protector can also direct the actions of a trustee.

Other powers given to trust protectors can be similar to the power granted to a trustee, such as making investment decisions, discretionary distributions to beneficiaries, or other trust administration matters.

When Trust Protectors Are Used

Any trust can use a trust protector, but they are commonly used in irrevocable trusts. In most cases, the grantor gives their right to modify the terms of an irrevocable trust. If unforeseen events happen that require modification of the trust, the grantor will have a difficult time making any changes.

A trust protector can be valuable in these situations. They can be given the power to correct errors, amend or terminate the trust, or to remove or add trust beneficiaries. Because the trust protector is a third party (not the trust grantor), the trust can still receive the legal treatment of an irrevocable trust.

Trusts that will last a long time may also benefit from appointing a trust protector to give the trust the flexibility to change over time if necessary.

Choosing a Trust Protector

Trust protectors can be attorneys or entities designed specifically to serve as trust protectors. The important thing is that the trust protector is a neutral third party.

You have the option of limiting or expanding the trust protector’s powers as you see fit. You can limit their powers to only removing and replacing the trustee, or you can give them many powers that trustees typically possess when drafting your trust.

Discuss the role of a trust protector with your estate planning attorney whenever you create or modify a trust.

King Law Offices is a full-service law firm with an outstanding team of professionals who work diligently, creatively and compassionately on behalf of our clients each day.  We serve the Upstate of South Carolina and Western North Carolina.  Call 888-748-KING (5464) today for a consultation.

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