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Trust Protector Can Ease Family Tensions, Assist With Business Asset

March 23, 2012 / in 2010 Summer, Probate & Estate Planning, Written by Katherine Albrecht

Trusts and their administration can involve complicated or delicate decision-making by family members, often resulting in uncomfortable rifts among beneficiaries and trustees. The new Michigan Trust Code (MTC), which took effect April 1, 2010, sets forth the law governing the administration of trusts in Michigan. It now offers a viable option to help administer the trust: a Trust Protector.

A Trust Protector is a person or committee named in a trust agreement to direct certain actions with respect to the trust.  This person/committe is neither the person who created the trust, nor the trustee.  As a third party, the Trust Protector may be given authority to make certain decisions that could be difficult for the trustee to make, bringing neutrality or distance to delicate family decisions, or business expertise to the operation of trust assets.  These types of decisions could include:

  • A determination whether a beneficiary has a substance abuse problem, so that the trustee should withhold or modify distributions to that beneficiary.  The designation of a Trust Protector to make these decisions could ease tension between the beneficiary and a sibling of the beneficiary who is serving as trustee.
  • The decision to terminate a trust because the circumstances for which the trust was created have changed.  For example, a trust designed to protect a child who was having marital or creditor problems may no longer be necessary once those problems have been resolved.
  • The decision to change the location where the trust is administered or to change which state’s law governs the trust.  This allows flexibility to deal with changes in state law and changes in circumstances affecting the trust.
  • Decisions regarding the operation of a business that is an asset of the trust, especially where the trustee has little or no familiarity with the business.

If your trust assets include a closely held business, if a future beneficiary of your trust requires special consideration, or if you want to provide an additional measure of flexibility in your estate plan, you may want to consider naming a Trust Protector in your trust.