Does a Living Trust Need a Trust Protector?

 In Revocable Trusts

Question:

Is a living trust required to include a Trust Protector?

Photo by Ben Koorengevel on Unsplash

Response:

No. Trust protectors are typically used in irrevocable trusts rather than revocable ones, and even then they’re unusual. (“Living trusts” was a term a trust marketing person came up with years ago for revocable trusts.)

Trust protectors came out the off-shore asset protection world. Under the rules for such trusts in many jurisdictions, in order to protect assets from lawsuit and still be a beneficiary, the creator of the trust had to give up all control. But that’s a risky venture given that trustees may not always perform well and circumstances or laws might change requiring that the trust be amended. As a result, drafters came up with the role of “trust protector.” This is someone the grantor trusts who is neither the grantor nor a potential beneficiary and who typically has the right to amend the trust within certain limits, to hire and fire trustees, and to review trust accounts.

There’s no need to appoint a trust protector in a revocable trust because the grantor has all these rights. Trust protectors are, however, now used in other types of irrevocable trust, such as those used for Medicaid planning, certain tax planning and special needs trusts.

All of this said, some revocable trusts continue after the death of the grantor, at which point they may benefit from a trust protector, or at least someone with the power to hire and fire trustees and review accounts, even if that person or those people don’t have the formal title of Trust Protector.

Related Articles:

When is Trust Protector Needed and What is it’s Function?

What is a Trust Protector and What are the Benefits of Having One?

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