President-elect Donald J. Trump is scheduled to take office on January 20, 2017. One Trump campaign proposal has been to eliminate the current estate and gift tax system and to replace it with a to-be-determined capital gains tax arrangement. At this time, nobody knows exactly what will happen to the current tax system.
We frequently advise our clients about the importance of establishing a well thought out estate plan and then keeping that plan updated. In times of uncertainty, estate plans need to be flexible and ready to adapt to changing circumstances.
One example of providing for flexibility in an estate plan is naming a trust protector. A “trust protector” is an individual or group of individuals who are given certain powers to make sure that the purposes and goals of the creator of a trust (the “grantor”) are being fulfilled. Many estate plans contain trusts that will likely continue for the benefit of a spouse’s lifetime and then possibly for the benefit of several generations. The appointment of a trust protector may be particularly appropriate in these situations.
The term “trust protector” means any person (other than the grantor, a beneficiary of the trust or a trustee of the trust) who is authorized to play a role in the administration of a trust. The role can be whatever the grantor designates in the trust instrument. Generally, the trust protector may be a family member or friend, an unrelated trusted advisor, or a group of these individuals acting by majority or unanimous agreement. The choice of who to name as the trust protector will depend on the wishes of the grantor and the intended duration of the trust.
After the death of the grantor, a trust protector can be given the power to “fix” the trust when laws change, or the occurrence of other circumstances which were not anticipated by the grantor. The grantor should carefully consider the specific purposes and goals for his or her trust and should only give the trust protector powers that will further those purposes and goals.
The trust protector might be given the power to add, remove or replace a trustee of the trust after taking an objective look at the trustee’s actions or inactions and determine if the intent of the grantor is being fulfilled.
Since it is impossible to predict where the beneficiaries and trustees of a trust might live in the future, the power to change the situs (location) and governing law of the trust can be important to insure that the trust will continue for as long as the grantor intended. Giving this power to the trust protector can allow an objective party to determine if the change will be beneficial or is necessary.
Adding a trust protector to your plan is just one way to achieve planning flexibility. If you would like to have your current estate planning documents reviewed and updated, please call our office.