When you create a trust as part of your estate plan, you name a trustee. Their responsibility is to manage the trust and disburse its assets to beneficiaries – typically based on the instructions you’ve left.
Usually, a trustee is a member of the family or perhaps a close friend. Sometimes people choose a financial institution’s trust department which can be objective and not susceptible to family influences.
Why would a trust protector need to step in?
Trustees have a fiduciary duty to manage the assets responsibly for the beneficiaries and not to take actions that are for their own benefit. If they’re caught doing that, they can be subject to lawsuits and even criminal charges.
What if someone whom you always found to be honest and reliable is just too tempted by the amount of money over which they have control and finds a way to redirect some of it to themselves or other non-beneficiaries? Maybe they just don’t have the knowledge to effectively manage the assets in the trust and don’t want to hire a professional to help.
That’s where a trust protector comes in. Their job is to oversee the trustee, fire them if necessary and appoint another one (although not themselves) as well as a successor protector. You can limit a trust protector’s powers in your estate plan.
What does Tennessee law say about trust protectors?
Under Tennessee law, a trust protector, also known as a trust advisor, can be given these powers as well as others, such as the ability to:
- “[M]odify or amend the trust instrument to achieve favorable tax status or respond to changes in any applicable federal, state, or other tax law affecting the trust”
- “[I]ncrease or decrease any interest of the beneficiaries in the trust, to grant a power of appointment to one (1) or more trust beneficiaries….”
- “[P]erform a specific duty or function that would normally be required of a trustee or co-trustee”
The choice of a trust protector is every bit as significant as your choice of trustee. It’s essential to know what kind of authority you can and want to give them over the trustee and the trust. The more you know about this position, the better you can choose the best candidate and craft your directives for them.