The role of Trust Protectors, Trust Advisers, and Special FiduciariesThe role of Trust Protectors, Trust Advisers, and Special Fiduciaries

This article explains some of the powers that Trust Protectors, Trust Advisers, and Special Fiduciaries might be given.

Trust Protector: a trust protector is a third party who is given contractual powers to protect the terms of a trust.  The position of trust protector has been common in offshore asset protection planning but is a newer concept in onshore asset protection planning.  A trust protector’s powers and authority are spelled out in the trust instrument.  The most common power of a trust protector is the ability to remove and replace a trustee who is not administering the trust according to its standards or responding properly to beneficiaries’ needs.  Trust protectors are also sometimes given the authority to decant trust assets, change a situs of administration, invest trust assets in a new trust, or make technical amendments to an irrevocable trust.  Trust protectors may also have any of the following powers:

  1. Resolve co-trustee disagreements via a tie-breaking power.
  2. Power to veto investment decisions.
  3. Change trust terms in the event of unforeseen circumstances such as divorce, irresponsibility, or changes in law.
  4. Ability to terminate the trust.
  5. Dispute resolution between beneficiaries and trustees.

Trust Adviser: individual or committee that will provide the trustee with necessary insights relating to beneficiaries’ needs and oversight of the trustee’s administrative services.  Advisers are fiduciaries who may be given power to direct the trust’s investments or special assets.  Advisers may have trust administration powers or control, but advisers are not trustees.  Advisers do not have title or rights to possess any trust assets.  Furthermore, an adviser’s powers are only provided for in the trust instrument and not by law.  The trust should make clear what the adviser’s responsibilities are in dealing with the trustee and beneficiaries, the trustee’s rights and responsibilities in dealing with the advisers and the rights of the beneficiaries in dealing with both the trustee and the adviser.[i]  Possible powers of a trust adviser or advisory committee:

  1. Consult with trustee with respect to general investment policy.
  2. Consult with the trustee regarding discretionary encroachments upon principal.
  3. Direct the trustee with regard to the specific selection of assets for purchase, sale retention, and transfer if the adviser/committee deems it necessary or appropriate to do so.
  4. Direct the trustee with regard to the selection, retention, and evaluation of policies of life insurance.
  5. Remove the trustee at any time and appoint a successor trustee.
  6. Appoint an investment adviser to advise and direct the trustee regarding the investment of trust assets.
  7. Order the transfer of trust property or the situs of trust administration.[ii]

Special Fiduciary: In Nevada, NRS 140 allows the court to appoint a special administrator to collect and take charge of the estate of a decedent and to exercise whatever powers may be necessary to preserve the estate:

  1. If there is a delay in granting letters testamentary or letters of administration.
  2. If the letters are granted irregularly.
  3. If no sufficient bond if filed as required by the court.
  4. If no petition is filed for letters.
  5. If an executor or administrator dies or is suspended or removed and an immediate appointment is needed under the circumstances.
  6. If there may be no assets subject to administration but good cause exists for the appointment of a personal representative of the decedent.
  7. In any other proper case.[iii]

[i] Gilman, Sheldon G., How and When to Use Trust Advisers Most Effectively, 35 Est. Plan. 30, 38 (2008).

[ii] Gilman, Sheldon G., Effective Use of Trust Advisers Can Avoid Trustee Problems, 35 Est. Plan. 18, 25 (2008).

[iii] Nev. Rev. Stat. § 140.

 

Robert L. Morris