So you have named your children as your successor trustees of your trust, the personal representative in your will or your financial power of attorney. You may have named your oldest child first as your financial agent because you think it is the right thing to do, …. or is it? Different people have different skills and you should choose accordingly.
Are financial money management skills one of the gifts that God has given your named successor trustees or other financial agents? Also, are those chosen persons trustworthy? Why do you think it is called a trust? It is because you are trusting your trustee to handle your funds and other property in accordance with your instructions.
Money does strange things to people. Even the prospect of money can change a person’s personality. When money is involved, it can turn some of the most loving families into seething masses of greed.
If you have only a power of attorney there are very few checks and balances. Your financial agent generally has full authority to do whatever you can do. With a trust, you can generally put more instructions for you during your lifetime and for your family after you are gone, than in a financial power of attorney. In addition, with a trust, you can appoint a trust protector.
A trust protector is basically a watchdog over your trust and the persons whom you have named as your successor trustees. With all of your financial assets and other property in your trust, your trust protector can make sure your wishes are followed.
Your trust protector should be an independent third party who has no interest in your property or your estate. Often times it is a CPA, trust company or close family friend. Your trust protector may be a committee of people. There also may be companies that provide trust protector services for a fee.
I generally do not recommend that a sibling of your successor trustee be named as your trust protector. There is nothing that can more quickly ruin family relationships than having one sibling being a watchdog over another.
Whatever powers you give to your trust protector, you should be as specific as possible. Your trustees and beneficiaries as well as your trust protector, should know the nature and the extent of your trust protector’s powers. So what can your trust protector do?
Your trust protector could have the power to amend your trust:
- for changes in trust, tax or other laws;
- to minimize the amount that gets paid out as taxes and fees;
- to maximize the amount that would be going to your beneficiaries; and
- to make sure the purposes of your trust are accomplished.
- Your trust protector could also have trustee removal powers. If, in the opinion of your trust protector, your trustee is not acting in the best interests of your trust or your wishes, your trust protector could remove your trustee.
- If there is a disagreement between your trustees or between your trustees and your beneficiaries, your trust protector can act as the referee to resolve the matter and to make sure that everyone is equally unhappy.
- Your trust protector can be named as a recipient of your trustee’s annual accounting of your trust. The financial activities of your trust could then be reviewed by your trust protector on at least an annual basis. Your trust protector can also have the power to review the reasonableness of trust investments.
- With a trust protector, you can be assured that if your successor trustees are not following your wishes, there is someone around to enforce those wishes.
By: Matthew Wallace CPA, JD
Published edited May-June, 2014 in Savvy magazine as: Protecting your trust with a … trust protector