Powers of the Trust Protector

The Trust Protector is the guiding force of a Model Offshore Trust.

When you establish a Model Offshore Trust, you automatically are the initial Trust Protector. As explained below, you will have the power to appoint others to succeed you as Protector.

The Protector monitors the performance of the Trustee, to assure that the Trustee is mindful of the Grantor’s intentions, and he provides the Trustee with timely information about the wishes, needs and circumstances of members of the Beneficiary Class.

The Model Terms of Trust confer extensive powers on the Trust Protector so that he can act effectively. As explained in Protect the Protector, those powers have been carefully crafted to insulate the Protector from pressure or coercion from any source.

The Right to Confer

The Protector has the right to confer with the Trustee on any matter concerning the Trust. He may advise the Trustee on the apportionment of benefits among the Beneficiary Class, on investment decisions and, in appropriate circumstances, on the division of the Trust into separate Trusts. He may bring any pertinent fact to the Trustee’s attention.

The Trustee is obligated to apply the Trust Fund exclusively for the benefit of members of the Beneficiary Class and in accordance with the intentions of the Grantor. In fulfilling this legally enforceable duty, the Trustee is authorized to rely upon information provided by the Trust Protector. Thus the Trustee welcomes and values the Protector’s advice.

Power to Replace Trustee

The Protector of a Model Offshore Trust has a power to require the Trustee to resign in favor of a new Trustee. The replacement Trustee may be any independent trust company selected by the Protector and may be located anywhere in the world, including the United States.

The Trust Protector would also have the same power to replace any successor Trustee.

The Protector’s power to require the Trustee to resign contributes to the vitality of the Trust. If long-term changes should ever render the Trustee unsuitable, the Protector could have the Trustee replaced with another independent institution of the Protector’s choosing. Also, since the Trustee presumably does not want to be fired and lose a source of trustee fees, the Protector’s power assures that the Trustee will take notice of, and give appropriate weight to, the Protector’s recommendations.

Power to Appoint Successors

You, as Grantor, are the initial Protector of the Trust. You may (and should) appoint one or more individuals to be your potential successors as Protector, and rank them in order of succession. When you die or resign as Protector, the potential successor who is first in order of succession becomes the new Protector.

You may elect to give any one or more of your potential successors the power to appoint their own potential successors. (Such power could be exercised only by a person who actually became the Protector.) If the you fail to do so and a situation later arises in which there is no Trust Protector, the Trustee will appoint a Protector from among the individual members of the Beneficiary Class.

In most cases, you as Protector should appoint at least two potential successors, to guard against the possibility that your first choice might not survive you or that your first choice, even if he is empowered to appoint a successor of his own, might fail to do so.

The Grantor’s authority to give, or not to give, a particular successor the power to appoint his own successors adds flexibility. The Grantor can name one person (such as a spouse) as the first in line of succession — and still be assured that the person he has named as second in line of succession (such as a child or grandchild) will become the Trust Protector when the first person dies or resigns.

The Grantor can revoke or amend any appointment of potential successors he has made. Similarly, any succeeding Protector who has been given the power to appoint his own successors can revoke or amend any appointment he has made.

Power to Divide

The initial Protector (the Grantor), and every succeeding Protector who is authorized to appoint his own successors, can require the Trustee to divide the Trust into two or more separate Trusts and appoint the Protector of each of the separate Trusts.

Miscellaneous Powers

With the consent of the Trustee, the Protector may add public benefit (charitable) organizations to the Beneficiary Class, but the Protector has no power to add an individual.

In the event of an emergency that would threaten the integrity of the Trust, the Trustee is authorized to remove the Trust to another jurisdiction. If the Trustee were unable to do so (because of the nature of the emergency), the Protector would have the power to apply to a court in any jurisdiction to select a new Trustee.

And the Trust Protector, with the consent of the Trustee, can appoint a licensed trust company anywhere in the world as a “Standby Trustee” — and describe possible future events which, if they occur, automatically cause the Trustee to be replaced by the Standby Trustee. A triggering event could be, for example, the filing of a legal action against the Trust in a local court or the Protector’s mere declaration that the Trustee should resign in favor of the Standby Trustee.

Beneficiaries Protected

The Protector does not have the power to remove anyone from the Beneficiary Class. Only the Grantor has that power, and not even he can pass it on to someone else.

NEXT: Long-Term Planning

The Model Offshore Trust is designed for long-term, inter-generational planning.

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