A trust protector is an independent third party with the authority to perform certain duties concerning a trust. These powers are limited to specific powers, usually to veto certain trustee decisions. The trust agreement typically details the trust protector's responsibilities and areas of authority.
The veto power may include:
• To remove and replace the Trustee
• To consent to / veto distributions to beneficiaries
• To approve the addition or exclusion of beneficiaries
• To permit a change of situs or governing law of the Trust
• To terminate or resettle the Trust
• To appoint their own successor protector
There is no legal requirement to appoint a protector when creating a trust, and indeed many trusts do not have protectors. It is very much up to the settlor to decide whether he wishes to have one.
Who could be a Protector?
The settlor of the trust will appoint the protector and this is usually a family friend or trusted advisor who would likely act impartially in the event of a family dispute, whether among the beneficiaries or between the trustee and a beneficiary.
The settlor can also stipulate successive protectors within the trust deed in the event of a protector passing away or stepping down.
It would be unlikely to appoint the trustee as protector as the role should be independent, albeit there is no legal restriction on this.
Pitfalls of Protector
Consideration and care should be taken to ensure that the powers conferred on a protector are not so broad as to deem the protector as a 'de facto' Trustee. Individuals who are requested to take on the position of protector should always consider the amount of powers conferred on them and consider whether professional advice is required in their country of residency.
