Incentive trusts can be useful tools for people who are concerned about an heir's ability to use an inheritance constructively, and who want to encourage responsible behavior.
But the structure of these trusts can make beneficiaries resentful because not only is that individual's access to the inheritance being restricted, but a third party is determining whether distribution conditions are being met. Often, the resentment is directed toward the corporate trustee, who is ultimately in charge of dispersing the funds.
While the best way to prevent disputes between heirs and corporate trustees is to make the terms of an incentive trust as explicit as possible, interpretation on the part of the trustee is inevitable.
Enter the "trust protector."
A trust protector is an individual with very close ties to the beneficiary. He or she could be a senior family member or a close adviser who knows the family intimately. That knowledge puts the trust protector in a unique position to help advise the corporate trustee on complicated issues or, in some cases, even overrule their decisions.
An arbiter of sorts, the trust protector can step in when there is a disagreement between the beneficiary and trustee. Having a close relationship with the beneficiary doesn't mean the trust protector is at odds with the trustee, however. Indeed, the two roles are meant to work in concert, and in many cases, the trust protector can help confirm that the decisions being made by the trustee are the right ones.
Ideally, the trust protector's authority will be outlined plainly in the language of the trust. For example, a grantor might specify that the trust protector has the power to override or even replace a trustee if he or she feels the trustee is being too restrictive in distributing the inheritance.
Trust protectors also can be authorized to intercede if they feel the assets in the trust aren't being invested as efficiently as possible.
If you have an estate plan in place, review it with your attorney every three years. If you do not have an estate plan, give us a call and we will set a time for you to meet with Brad. He will put together the plan and make it easy for you and your family.