Trust Protectors Under Current Florida Law: A Passing Trend or Valuable Planning Tool?

Trust protectors are an important tool in estate planning, especially for long-term trusts. They can help make changes to the trust as needed, to accommodate changes in tax laws and the lives of the trust beneficiaries. They have been around for a long time and are not just for offshore trusts. Trust protectors can provide flexibility in planning for the future. Minassian v. Rachins is a court case where a man set up a trust for his wife after he passed away. The trust allowed his wife to appoint someone called a trust protector, who had the power to change the trust if there were mistakes or to benefit the beneficiaries. The man’s children disagreed with the changes the trust protector wanted to make, and went to court to challenge them. The court had to decide if the changes were allowed under the trust. In these court cases, it was found that trust protectors can be appointed to make decisions about a trust, even if the original trust document doesn’t specifically mention them. The court said it’s okay for them to make decisions about the trust as long as it’s in the best interest of the beneficiaries. It’s like having someone watch over the trust to make sure everything is being handled properly. A trust protector is someone chosen by the person who created the trust (the settlor) to watch over the trust and make decisions if the settlor can’t. They act like the settlor would if they were still alive. This helps protect the settlor’s interests and can save the beneficiaries from having to watch over the trustee. In one case, a court ruled that a beneficiary couldn’t make a decision without the trust protector’s approval. In another case, a trust protector was removed for not doing their job properly. Two court cases involving trusts were reviewed. In one case, there was a dispute over who should control the trust’s distributions. The caretaker of the person who made the trust wanted the drafting attorney to have that control, while the children of the person who made the trust disagreed. In the other case, one person tried to disqualify the other person’s lawyer because the lawyer used to work with someone who had a role in the trust. These cases show how complicated and contentious trust disputes can be. In the U.S., there are different state laws about trusts, and some states have specific rules about who can control trusts. 1) Understanding the roles and responsibilities of people involved in managing a trust, including trustees, advisors, and protectors.
2) Defining the authority and limitations of trust protectors and advisors, and how they can be held accountable.
3) How trust protectors can be taken to court if they don’t fulfill their duties.
4) Discussing the legal obligations and potential liability of trust protectors and advisors.
5) Explaining who is responsible if something goes wrong with the trust.
6) Deciding whether protectors and advisors need to keep an eye on the trustees’ actions.
7) Setting time limits for taking legal action against advisors and protectors.
8) Determining who can receive important information and notices from the trust.
9) Rules to prevent changes to certain types of trusts that could have negative consequences.
10) Figuring out if protectors and advisors can get paid back for their work from the trust’s funds. The National Conference of Commissioners of Uniform State Laws is working on a new law called the Directed Trust Act. This law deals with a common type of trust called a directed trust, where one person is in charge of the trust’s property and another person makes decisions about how the trust is managed. The law aims to create clear rules for how these trusts are managed, because the current laws are confusing and inconsistent. This type of trust is often used in estate planning and managing assets. Trust protectors are not used very often because there is a lot of confusion about what they can do and how they are regulated. State laws don’t really specify what powers they have, so those powers need to be written out clearly in the trust document. Some examples of powers they could have are: removing a trustee, adding a new trustee, deciding on trust distributions, and making changes to the trust. There are other possible powers as well, but they all need to be clearly written out in the trust document. Trust protectors may or may not have a fiduciary duty, depending on the trust instrument. Some states default to fiduciary status for trust protectors, while others require the trust instrument to specify. The role of a trust protector is to “protect” the trust and can provide flexibility and outside consultation. However, if a trust protector breaches their duty, they may be responsible to interested parties. It’s important to carefully consider the role of a trust protector and clearly define their responsibilities in the trust instrument. Trust protectors, like in Florida, are usually required to act in the best interest of the beneficiaries and the trust. They can be held responsible for any losses if they don’t do this. Most states also require them to act in good faith and follow the trust’s purpose. Some also recognize that trust protectors are there to protect the wishes of the person who made the trust. So, they might have specific instructions to follow in the trust document to make sure they’re not blamed by the beneficiaries for following the trust’s rules. A trust protector is someone who can make sure a trust is being managed properly and can make changes if needed. They can be helpful for clients because they can save time and money compared to going to court. When choosing a trust protector, it’s important to think about why you need one and who will be a good fit. Consider the assets in the trust and if the protector has the right skills to handle them. It’s a good idea to talk with a lawyer to make sure everything is set up correctly. A trust protector’s powers should be carefully considered to meet the needs and wishes of the beneficiaries. It’s important to think about when and where the trust protector will act, and what standard of care will apply to them. It’s also important to think about ways to provide flexibility and address unexpected circumstances, such as power of appointment, decanting, and alternative dispute resolution provisions. These alternatives can achieve the same objectives as trust protectors while avoiding potential liability and allowing for greater flexibility. For more information, you can check out Lawrence A. Frolik’s article “Trust Protectors: Why They Have Become ‘The Next Big Thing’.” This is a list of legal cases and articles about trust law. It includes citations to court cases and articles written by attorneys about the role of trust protectors. The author is a certified wills, trusts, and estates attorney. This information is provided by the Real Property, Probate, and Trust Law Section of The Florida Bar.

Source: https://www.floridabar.org/the-florida-bar-journal/trust-protectors-under-current-florida-law-a-passing-trend-or-valuable-planning-tool/