What is a Trust Protector in California?

What is a Trust Protector in California? In estate planning, particularly in California, a trust is a crucial tool for managing and distributing assets according to your wishes. However, as life circumstances and laws change, a trust may require adjustments or oversight that go beyond the capabilities of a trustee. This is where a Trust Protector comes into play.

What is a Trust Protector?

A Trust Protector is a person or entity appointed in a trust document with the authority to oversee and, in some cases, modify the trust’s terms to ensure that the trust’s objectives are met. The Trust Protector’s role is relatively new in estate planning but has become increasingly popular, especially in states like California, where laws and family situations can change significantly over time.

The Role and Powers of a Trust Protector

The powers of a Trust Protector can vary widely, depending on the specific language in the trust agreement. Some of the typical responsibilities and powers of a Trust Protector in California include:

1. Modifying Trust Terms: A Trust Protector may have the authority to amend the trust to adapt to changes in tax laws, family circumstances, or other relevant factors. This can be particularly important if the trust was created many years ago and the legal or personal landscape has shifted.
2. Removing or Replacing Trustees: If a trustee is not acting in the best interest of the beneficiaries of the trust or is unable to perform their duties, the Trust Protector may have the power to remove or replace the trustee. This adds a layer of protection for the beneficiaries and ensures that the trust is managed effectively.
3. Mediating Disputes: In some cases, a Trust Protector may act as a mediator in disputes between beneficiaries and trustees or among beneficiaries themselves. This can help avoid costly and time-consuming legal battles.
4. Approving Trustee Actions: A Trust Protector may be required to approve certain significant actions taken by the trustee, such as the sale of a major asset or a change in investment strategy.
5. Changing the Situs of the Trust: The Trust Protector may have the power to change the trust’s jurisdiction, or situs, if it benefits the trust in terms of tax advantages or legal protections.

Potential Advantages 

Appointing a Trust Protector can offer several advantages, particularly in complex or long-term trusts:

• Flexibility: Trusts are often intended to last for many years, if not generations. A Trust Protector can provide the flexibility needed to adapt to changing circumstances without the need for lengthy and expensive court proceedings.
• Oversight: Even the most carefully chosen trustee may face challenges that could affect their ability to manage the trust effectively. A Trust Protector provides an additional layer of oversight to ensure the trust is managed according to the grantor’s wishes.
• Dispute Resolution: Family dynamics can be unpredictable, and conflicts may arise among beneficiaries. A Trust Protector can help resolve these disputes without resorting to litigation, preserving family harmony and the trust’s assets.

Who Should Be a Trust Protector?

Choosing a Trust Protector is a critical decision. The person or entity selected should be someone with a deep understanding of the grantor’s intentions, the legal and financial complexities of the trust, and the ability to act impartially. 

The Trust Protector is usually an attorney, most commonly the lawyer who drafted the trust. Sometimes it is a succession of attorneys from the same firm, in case one of them should pass away or retire before they’re needed. However, the law does not require the Trust Protector to be an attorney. The Trust Protector may be a trusted family advisor, a CPA, or a professional fiduciary. 

A trust protector must meet the following requirements:

• A third party to the Trust (someone who is not the Settlor, Trustee, or beneficiary)
• Neither related to nor a subordinate of the Settlor.
• Capable of performing the functions of a Trust Protector.

Potential Disadvantages

Not all trusts include a trust protector. Before adding this role to your living trust, consider the potential drawbacks:

• Difficulty in Selection: It may be difficult to select an honest, competent, and reliable Trust Protector.
• Increased Expense: Adding a Trust Protector may lead to a more expensive trust administration. If the trustee has to communicate and work with both the Trust Protector and the beneficiaries, this can increase the cost of the administration. 
• Lack of Legal Clarity: The role of the Trust Protector lacks consistent understanding across jurisdictions, which leads some attorneys to avoid naming them. 

If you’re considering setting up a trust or reviewing an existing one, it may be worth discussing with your estate planning attorney whether a Trust Protector could be beneficial for your situation. If you have any questions about this topic, “What is a trust protector in California?”, feel free to contact our office.

Law Offices of Daniel A. Hunt

The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.