Every Trust Needs a Trust Protector
I have come to the conclusion that every trust needs a Trust Protector. The reason is that you have no idea what will happen in the future. And once you are gone, there is at least a possibility that your family will fight over who gets what and how everything gets divided. It is also possible that other changes may need to be made. I discussed Trust Protectors previously here. But this is such an important topic that I wanted to share a story about why this is so important.
I recently got a phone call from a lady whose husband died a little over a year ago. They had created a joint revocable trust naming themselves as the trustees. The value of their trust was around $3 million. They named their adult child (now disabled) as the successor trustee to take over if neither of them was able to be trustee any longer. So … when the husband died, the wife had a nervous break down. She could no longer manage her affairs. The next-in-line trustee was their child (who was also incapacitated). That meant that there was no one able to manage her finances.
Here’s what happens in a situation like this (and what happened to her). The County Attorney brought a Petition to appoint a private fiduciary company as her guardian (to make health care decisions for her). This company also became her trustee. There was litigation over whether she needed a trustee and guardian. Over the course of one and a half years, the lawyers ate up approximately $500,000!!!
Even if she is able to prove that she can now serve as trustee again, this is still set to be a problem in the future. Years from now when she is much older and perhaps develops dementia or is otherwise unable to manage her affairs, the government will again have to step in and name a new trustee. And the new trustee is almost certainly going to be a stranger!
This could have easily been avoided by naming a Trust Protector. And the future problem (which is almost certainly going to happen) could be avoided by asking the Court to amend the trust by adding Trust Protector language. Because this is so powerful, I encourage my clients to include very broad trust protector powers. (I am happy to send you my preferred trust language if you email me at [email protected].)
You can read more about Trust Protectors in an article on Forbes.com from 2012. In the meanwhile, if you have any questions about trusts or Trust Protectors, give me a call. I’m passionate about helping families avoid (or solve) court battles and family feuds.