I’ve heard more than one trust beneficiary say: “I wish I had a trust protector.” The circumstances underlying the wish vary. So, let’s talk about a few of them.
A mother, dying of terminal cancer, hires a local estate planning lawyer to prepare a trust. The trust is to provide, at her death, a lifetime income benefit for her 60-year-old son. The mother is the trust settlor. The son is the beneficiary. The mother identifies The Little Sisters of the Poor as the beneficiary of whatever trust assets are left at her son’s death.
The mother meets with the estate planner. The estate planner recommends a health, education, maintenance and support trust (HEMS) for the benefit of the son. The estate planner suggests a local fiduciary, a fiduciary licensed by the California Professional Fiduciaries Bureau, as the successor trustee to take her office at the mother’s death.
Mother dies. The trust holds millions of dollars in assets. Son is living in the mother’s house. The house does not have a mortgage. Soon after the mother’s death, the licensed fiduciary meets with the surviving son. The fiduciary takes no notes.
The fiduciary indicates that he is inclined to pay very little income toward the son’s health, education, maintenance and support. Soon after the meeting, the fiduciary moves to evict the son from his deceased mother’s house. The son learns that the fiduciary’s annual fees will exceed that which the son, the sole life beneficiary, will receive.
Mother really didn’t set up the trust to benefit a largely unknown and for-profit fiduciary. More than that, the fiduciary is using trust funds to hire the lawyers who are working to evict the trust’s sole lifetime beneficiary from the house. The son is shocked and almost in a state of disbelief.
The son meets with estate and trust litigation lawyers and learns of his options to challenge the action, inaction and/or wrongdoing of the trustee. He learns that his options are expensive and time-consuming.
He is chagrined. He knows that his mother didn’t want a trustee, a person that she didn’t know, to act like this. To cause anxiety. To increase grief. To bring conflict to a trust that was supposed to benefit the mother’s only child. To use trust funds to evict him.
After hearing and discussing his options with his lawyers, he says: “I wish I had a trust protector.”
Fiduciary abuse, of course, is not limited to errant licensed California Professional Fiduciaries. Similar abuse is found in financial institutions with the legal power to operate as a trust company. And probably the most common trustee abuse is caused by the ignorance, incompetence or even malice of family members given the task of administering a trust.
So, how would a trust protector help? A trust protector provision in a trust agreement may permit a trust protector to direct the trustee in matters concerning the trust, and to assist in achieving the settlor’s objectives as expressed by the other provisions of the trust. The trust protector may be a corporate fiduciary or individual.
The trust protector is often given powers to amend or modify the trust agreement, change the governing law of the trust and place of administration, remove and appoint trustees, and construe the terms of the trust agreement. These powers and others should be identified in the trust.
And, how would the powers apply in the cases of an errant licensed California professional fiduciary, a financial institution with the legal power to operate as a trust company or an unskilled or abusive family member acting as a trustee? If the trust agreement provides that the trust protector may remove any trustee “at any time, with or without cause,” the trust protector may remove the trustee.
The notice of removal must be made in writing and delivered to the trustee being removed. The removal of the trustee will be effective in accordance with the terms of the notice of removal. That’s more efficient and effective than a drawn-out procedural process inherent in most trustee removal actions.
The lesson – ask your estate planning lawyer to put trust protector provisions into your trust. They count. They matter. They just might help prevent some unexpected and unwanted surprises.
That said, the removed trustee may just fight the removal. The fight is made much harder if the trust protector provisions are clear and sound. I share my thoughts on trust, estate and elder financial abuse litigation in a variety of forums. It is both a labor of love and of a desire to share some of my learning and experiences gained over decades of law practice.
Our law firm, Hackard Law, focuses on significant estate, trust and elder financial abuse litigation cases where we think that we can make a substantial difference and there is a wrongdoer who can be made financially accountable for their wrongdoing.
We focus our practice in California’s major urban Superior Courts, civil and probate.
We also represent out of state and foreign beneficiaries who are asserting rights or have disputes related to California estates and trusts. If you would like to speak with us about your case, call us at Hackard Law (916) 313-3030. We’ll be happy to hear your story.