Importance of Trust Advisor provisions in a Revocable Trust

The most common type of trust used for estate planning is a revocable trust created by the client during his or her lifetime.  For the typical couple, they reserve the right to amend or revoke the trust while they are both alive, but the trust is generally not amendable after the clients’ deaths.  After all, if the beneficiaries could amend the trust’s terms, what would be the point of putting restrictions on the beneficiaries?    So, if for instance, the clients wanted the beneficiaries to only be able to draw limited amounts of income, the beneficiaries can’t just amend the trust created for them to allow them access to more money.

But sometimes there are reasons not apparent to the clients during their lifetimes that might make the trust in need of some flexibility. How do we get that?  Enter the trust advisor, sometimes referred to as a trust protector.  This is a person who can make some alterations to the trust to help carry out the intent of the clients when they are no longer around to make those changes themselves.

One of the things trust advisors can do is resolve problems with the trustee of the trust.  Maybe there isn’t an individual or corporate trustee willing to serve. How does that vacancy get filled? Or maybe the beneficiaries believe the person acting as trustee is either not investing the trust property wisely or is otherwise not acting appropriately.  Who will resolve that issue?  Without trust advisor provisions, that means one or more of the beneficiaries would have to go to court and ask a judge to  either fill the vacancy or remove a trustee.  However, if the trust has trust advisor provisions, a trust advisor can be utilized to appoint or remove a trustee, often at a small fraction of the cost of going to court and asking a court for this relief.

Another area where a trust advisor may be useful is amending the trust language regarding the investment or administrative powers of the trust.  Perhaps there is something the beneficiaries and the trustee want to do, but the trust doesn’t permit that action.  As an example, an older trust may have been written before crypto currency was a recognized form of investment ( not that I’m suggesting that it is a wise investment now), so the trust would not have that as an available investment without adding that power.

Maybe changes to tax laws make a change desirable, so giving the trust advisor the ability to add language or make modifications for tax savings might be helpful.  One of the ways this is often done is not because of a change in the law, but because of a change in circumstances.  If a trust advisor has the ability to change powers of appointment, from limited to general, the advisor can maximize favorable tax treatment for the clients’’ grandchildren. Also, occasionally ambiguities arise, and a trust advisor can help resolve these issues.

While trust advisors can make trusts more flexible, they aren’t given the power to modify the beneficiaries, so clients don’t have to worry about a trust advisor taking money from their children.  But they are a useful tool for those with trusts, so if your trust doesn’t contain these types of provisions, you should consider consulting someone about adding them.

By: Michael G. Carroll