A “Trust Protector” is a relatively new but increasingly important role in the world of estate planning, particularly in Maryland. While not traditionally part of a trust’s structure, more individuals are appointing Trust Protectors to ensure their trusts operate smoothly and according to their long-term wishes. In this post, we’ll break down the role of a Trust Protector, how it differs from other fiduciary roles, and why you might consider appointing one for your Maryland trust.
What is a Trust Protector?
A Trust Protector is an individual or entity appointed to oversee and, if necessary, intervene in the administration of a trust. Their purpose is to ensure the trust’s terms are carried out according to the grantor’s intentions. While trustees manage the day-to-day operations of the trust, the Trust Protector acts as a safeguard, offering oversight and control in specific situations.
The role of a Trust Protector may vary based on the trust document and the wishes of the trust creator (grantor), but they often have certain key powers, which we’ll explore below.
Trust Protector vs. Trustee: What’s the Difference?
It’s important to differentiate between a Trust Protector and a Trustee. While they both have roles in trust administration, their responsibilities are quite distinct.
Trustee’s Role
The Trustee is the individual or entity responsible for managing the trust assets, making distributions to beneficiaries, and following the terms of the trust. They are a fiduciary, meaning they have a legal duty to act in the best interests of the trust beneficiaries.
Trust Protector’s Role
The Trust Protector, on the other hand, does not manage the trust’s assets or day-to-day operations. Instead, their role is more supervisory and reactive. They step in when specific issues arise, such as disputes between trustees and beneficiaries, or if there’s a need to amend the trust due to changes in law or other unforeseen circumstances.
Powers and Responsibilities of a Trust Protector
The scope of a Trust Protector’s authority is dictated by the trust document. Their powers can range from minimal oversight to more significant decision-making authority. Here are some common powers given to Trust Protectors in Maryland trusts:
1. Removing and Replacing Trustees
One of the most common powers assigned to a Trust Protector is the authority to remove and replace trustees. If a trustee is not performing their duties properly, acting in bad faith, or simply not fulfilling the grantor’s wishes, the Trust Protector can step in and appoint a new trustee.
2. Modifying the Trust
Trust Protectors may be granted the power to amend the terms of a trust to account for changes in law or circumstances. For example, tax laws can change over time, and a Trust Protector might need to adjust the trust terms to ensure that beneficiaries receive maximum benefits or avoid tax pitfalls.
3. Approving Trustee Decisions
In some cases, the Trust Protector may be given the power to review and approve certain trustee decisions. This can provide an added layer of security, especially if the trust involves complex financial or business interests.
4. Resolving Disputes
If there is a conflict between beneficiaries and trustees, the Trust Protector may act as a mediator or decision-maker to resolve disputes. This can help avoid costly litigation and ensure the trust operates smoothly.
5. Terminating the Trust
In certain cases, a Trust Protector may have the authority to terminate the trust if the original purpose of the trust has been fulfilled or if it no longer serves its intended purpose.
When Should You Consider Appointing a Trust Protector?
1. Complex Family Situations
Trust Protectors are especially useful in situations where family dynamics are complex or strained. If you anticipate disagreements between beneficiaries or trustees, appointing a Trust Protector can help mediate disputes and keep the trust functioning properly.
2. Long-Term Trusts
If your trust is designed to last for many years or even generations, appointing a Trust Protector is wise. Laws and family circumstances can change over time, and a Trust Protector can ensure the trust adapts to these changes.
3. Special Needs Trusts
In Maryland, Special Needs Trusts are commonly used to provide for beneficiaries with disabilities without disqualifying them from government benefits. A Trust Protector can oversee the trust to ensure it continues to meet the beneficiary’s needs while complying with legal requirements.
4. Protecting Business or Investment Interests
If the trust holds significant business or investment interests, a Trust Protector with expertise in these areas can provide additional oversight. They can ensure that the trust’s business dealings align with the grantor’s original intentions and respond to any market or economic changes.
How to Choose a Trust Protector
Selecting the right person to serve as a Trust Protector is crucial. Here are a few key factors to consider:
1. Expertise
You’ll want to choose someone with expertise relevant to the trust’s assets and goals. If the trust holds significant financial investments, selecting someone with financial acumen is a good idea. If the trust’s primary purpose is to provide for family members with disabilities, you might choose someone familiar with special needs planning.
2. Impartiality
It’s important that the Trust Protector be someone impartial, especially if the family dynamic is complicated. The Trust Protector should act independently and not be swayed by personal relationships with beneficiaries or trustees.
3. Familiarity with Your Wishes
The Trust Protector should have a good understanding of your wishes and values. In many cases, grantors select a trusted advisor, such as a Maryland lawyer or financial planner, who has worked closely with them and knows their intentions.
4. Availability and Commitment
Because a Trust Protector’s duties may span many years, it’s essential to select someone who will be available and committed to carrying out these responsibilities long-term. You may also want to name a successor Trust Protector in case the original protector is no longer able or willing to serve.
Legal Considerations for Trust Protectors in Maryland
Maryland law does not explicitly define the role of a Trust Protector. Therefore, it’s critical that the trust document outlines the Trust Protector’s specific powers and duties. This ensures clarity for all parties involved and minimizes potential disputes.
A well-drafted trust document will specify when and how the Trust Protector’s powers can be exercised, any limitations on their authority, and the process for removing or replacing them.
Conclusion
Appointing a Trust Protector can add an invaluable layer of oversight and flexibility to your trust, ensuring that it continues to serve its purpose even in the face of legal or familial changes. While not every trust requires a Trust Protector, those with complex assets, long-term goals, or challenging family dynamics can greatly benefit from this additional role.
Contact Blackford & Flohr for Trust Protector Guidance
If you’re considering appointing a Trust Protector or need assistance in managing your Maryland trust, Blackford & Flohr can help. Our experienced estate planning attorneys understand the complexities of trust administration and can guide you in making informed decisions that protect your assets and ensure your wishes are carried out.
For personalized advice and comprehensive estate planning services, contact Blackford & Flohr today.
