Trust Protectors: An Extra Layer of Protection
Traditionally, a trust has three main participants, a settlor, a trustee, and one or more beneficiaries. A settlor creates and/or contributes property to the trust. A trustee manages and holds the property in the trust for the benefit of other people who are said to have a “beneficial interest” in the trust. Beneficiaries are the people who have those beneficial interests. For example, a father, acting as a settlor, might create a trust, naming his wife as the trustee, to distribute money for the benefit of their children, who are the beneficiaries of the trust. However, a fourth participant has increasingly been used in trusts: the trust protector.
Historically, trust protectors were mainly used in offshore trusts and rarely in domestic trusts. A trust protector acts as an extra layer of protection for the settlor. A trust protector is customarily appointed to supervise the trust and ensure that the settlor’s intent is effectuated. A trust protector may have the power to modify terms of a trust to ensure that the settlor’s intent is carried out.