For you to reach the confidence level you’ll insist on before establishing an offshore or international trust…
- The Protector should have the power to confer with the Trustee on any matter pertaining to the trust, including investment policy and distributions to Beneficiaries.
- The Protector should have a broad (but not unlimited) power to fire the Trustee and replace it with another independent trustee.
- The Trustee should be authorized to rely reasonably on the information and advice it receives from the Protector.
Together these three features assure that the Trustee will give proper weight to the advice it receives from the Protector and never lose sight of your (the Grantor’s) intentions.
A conscientious Trustee welcomes the information it receives from the Protector about the needs and circumstances of the Beneficiaries. That information makes the Trustee’s job easier.
And almost any Trustee wants to continue to earn its trustee fees, so it doesn’t want to get fired by the Protector – which could easily happen if it disregards the Protector’s advice. A Trustee also wants to protect itself from complaints and legal claims, which it can do by reasonably relying on the information and advice it receives from the Protector.
Selecting A Protector
Who should be your trust’s Protector? Because the role is so important, most Grantors decide to keep it for themselves. They also keep the power to appoint their own successor as Protector, so that they can decide which one or more of their heirs should inherit the job of monitoring the Trustee.
But it isn’t necessary for you to be the Protector if you don’t want to be. The alternative is to make someone else the Protector – such as an international attorney or a second non-U.S. trust company.
Protecting The Protector
Because the Protector’s role is so important, the Trust Instrument should specify that the Protector may act only of his own free will – especially if you are going to be the Protector yourself. Such an “anti-duress” provision protects against any attempt to use a U.S. court to force the Protector to replace the Trustee with an institution located in the U.S.
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