Protecting the Protector
Of a Model Offshore Trust

As explained in the preceding Topic, the Protector (first you, then the successor you designate) monitors and advises the Trustee. The Protector’s powers are substantial.

Because the Protector’s role is so important, the Model Terms of Trust have been drafted to frustrate any attempt to disarm the Trust by usurping the Protector’s powers.

Suppose, for example, that you (the Grantor and Protector) lose a lawsuit in New York, and the winner is awarded a judgment too large for you to pay out of your personal assets. The creditor likely would obtain an order from a New York court that attempts to compel you to replace your offshore Trustee with a local (New York) trust company. Then the court could order the local trustee to make the Trust Fund available to the winner of the lawsuit.

To prevent such coercion, the Model Terms of Trust require that to force the Trustee to resign in favor of a replacement,  the Protector must act “of his own free will and volition.” Thus so long as the Protector is subject to an unwanted court order or to any other compulsion, his power to replace the Trustee hangs in suspense. He can’t use that power, and the Trustee would have a duty to refuse any attempt to use it.

The result: no third party, no matter how strong, can force the Protector to use his power for a purpose hostile to the Trust.

Further Protection

The Model Terms of Trust give the Protector still further protection from the unforeseeable. The Protector at any time may resign in favor of his designated successor. Or, with the consent of the Trustee, he may give up or limit any of his powers, either temporarily or permanently. Or, again with the consent of the Trustee, he can appoint a temporary agent or attorney to exercise any or all of his powers.

It is unlikely that a Protector would ever need to do any of these things. But it is good to be ready for the unexpected.

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