Management and Distribution Powers of a Trust Protector

Once you have decided to use a Trust protector you need to consider the powers that you plan to give him or her. The powers can be divided into two classes, those relating to trust management issues, and those relating to the distribution of trust assets.

Examples of management powers that can be granted to a trust protector are:

  • 1) to review or approve accountings prepared by the trustee;
  • 2) review and approve proposed investments;
  • 3) veto an investment decision made by the trustee;
  • 4) remove or replace the trustee, for good cause or any reason;
  • 5) add a co-trustee or appoint a successor trustee;
  • 6) change the situs or governing law of the trust;
  • 7) amend the trust to comply with tax or other law changes, obtain favorable tax status, make technical corrections, or correct scrivener’s errors;
  • 8) terminate the trust, determine whether an event has occurred;
  • 9) settle disputes between trustees, trustee and beneficiary or between beneficiaries;
  • 10) authorize litigation by the trustee against third parties.

Examples of distribution powers that can be granted to a trust protector are:

  • 1) requiring that the trust protector be consulted by the trustee about all distribution decisions;
  • 2) giving the trust protector power to veto a distribution decision;
  • 3) direct the trustee when and how to make distributions;
  • 4) amend the distribution provisions of the trust;
  • 5) change the beneficiary or act as an advocate for the beneficiary with the trustee;
  • 6) consent to the exercise of a power of appointment, and modify the terms of a power of appointment.

It is important to realize that if the trust protector is not an attorney or other professional who carries professional liability insurance, that person may be required to post a bond. Pennsylvania requires a fiduciary to act in good faith with regard to the purpose of the Trust and the interest of all beneficiaries. While the inclusion of a Trust Protector is not mandatory, it may be advisable to assure the intentions of clients who establish legacy Trusts are followed. If you have any questions call Gregory J. Spadea of the Law Offices of Spadea & Associates, LLC at 610-521-0604.

Deciding How and When to Select a Trust Protector

If you set up an Irrevocable Trust, the trust will have a perpetual term and may continue for generations. However, the problem with a long-term Trust is that it is not possible for the Grantor to anticipate future changes in the law or the family’s circumstances, which might require specific modifications to the Trust in order to better serve the needs of the beneficiaries. One way to allow the Trust to be more flexible is to appoint a Trust Protector.

A Trust Protector is a third party who is not the Grantor, Trustee or Beneficiary, but who is given specific powers in the Trust agreement to make changes to the Trust in order to carry out the Grantor’s intent. There are essentially three reasons a person would consider using a trust protector. One is to police the trustee. Although traditionally the beneficiary is tasked with the responsibility to keep a trustee in check, the grantor may not want the beneficiary to hold this power. Also, enforcing this power through a beneficiary can lead to costly and time-consuming litigation. A second reason is to guide the trustee regarding trust distributions especially in the special needs context and regarding investment decisions. A third reason is to empower someone to change the trust in order to adapt to future circumstances, such as changes in the law, the beneficiaries, or the trust assets.

Once the decision is made to use a trust protector, then the grantor and his attorney need to decide the basic structure. There are four things that should be considered.

  • 1. The first consideration is who should be the trust protector. A trust protector can be a person acting alone or a legal entity, such as a financial institution or law firm. When utilizing people, whether alone or in a group, the grantor can choose specific people, such as a relative or friend, or a person who fits into a certain class or category, such as the current guardian of the beneficiary, an accountant, or an attorney.
  • 2. If possible, there should also be successor trust protectors named, and a process for choosing a successor trust protector in case all of those named are unable or unwilling to serve. Authority can be granted to an existing trust protector to name his or her successor, or to someone else, such as the trustee, or the beneficiary to appoint successor trust protectors.
  • 3. There should be a mechanism to remove a trust protector, either for good cause or any reason. This authority can be held by other members of the trust protector committee or the beneficiary, or trustee.
  • 4. Lastly, reimbursement of reasonable expenses incurred by the trust protector should be
    authorized. In addition, compensation of a fixed annual amount or hourly rate can be paid.

If you have any questions call Gregory J. Spadea of the Law Offices of Spadea & Associates, LLC at 610-521-0604.

Understanding Your Rights as Trust Beneficiary

Understanding Your Rights as Trust Beneficiary

As a trust beneficiary, you may have rights, depending on both the type of trust and the type of beneficiary you are, to ensure the trust is properly managed.

A trust is a written agreement whereby a person called a settlor or grantor designates someone called a trustee to be responsible for managing their assets or property. The trustee holds legal title to the assets for another person, called a beneficiary. The rights of a trust beneficiary depend on the type of trust and the type of beneficiary.

If the trust is a revocable trust, the person who set up the trust can change it or revoke it at any time so the trust beneficiaries other than the grantor have very few rights. Because the grantor can change the trust at any time, he can also change the beneficiaries at any time. Often a trust is revocable until the grantor dies and then it becomes irrevocable. An irrevocable trust is a trust that cannot be changed except in rare cases by court order.

Beneficiaries of an irrevocable trust have rights to information about the trust and to make sure the trustee is acting properly. The scope of those rights depends on the type of beneficiary. Current beneficiaries are beneficiaries who are currently entitled to income from the trust. Remainder or contingent beneficiaries have an interest in the trust after the current beneficiaries’ interest is over. For example, a wife may set up a trust that leaves income to her husband for life making him the current beneficiary, and then the remainder of the property to her children who are the remainder beneficiaries.

The terms of the trust determine exactly what rights a beneficiary has, but following five common rights given to beneficiaries of irrevocable trusts:

  • 1. Payment. Current beneficiaries have the right to distributions as set forth in the trust document.
  • 2. Right to information. Current and remainder beneficiaries have the right to be provided enough information about the trust and its administration to know how to enforce their rights. This usually means given access to the trust document and the year-end bank or brokerage statements.
  • 3. Right to an accounting. Current beneficiaries are entitled to an accounting. An accounting is a detailed report of all income, expenses, and distributions from the trust. Usually trustees are required to provide an accounting annually, depending on the terms of the trust. Beneficiaries may waive the accounting if they are satisfied with the handling of the trust assets by the trustee.
  • 4. Remove the trustee. Current and remainder beneficiaries have the right to petition the court for the removal of the trustee if they believe the trustee is not acting in their best interest. Trustees have an obligation to balance the needs of the current beneficiary with the needs of the remainder beneficiaries, which can be difficult to manage. For example if the trustee does not make necessary repairs to real estate that the current beneficiary has a life estate in, and that will pass to the remainder beneficiaries or not following the intent of the trust. If the reason for removing the trustee is because of large losses of principal, the Court may order the trustee to repay the trust.
  • 5. Terminate the trust. In some circumstances, if all the current and remainder beneficiaries agree, they can petition the court to terminate the trust. Usually, the purpose of the trust or the intent of the grantor must have been fulfilled or it is impossible to fulfill.

If you need a trust or are a trust beneficiary with questions call Gregory J. Spadea of the Law Offices of Spadea & Associates, LLC at 610-521-0604.

Why Should I Prepay My Funeral by Setting up a Funeral Trust?


There are four reasons why you may want to prepay your funeral:

  1. Avoid inflation by locking in today’s prices.
  2. Guarantee your burial preferences.
  3. Eliminate the financial burden and tough decisions on your loved ones.
  4. Provide peace of mind that everything has been taken care of.

One way to prepay for a funeral is to set up a funeral trust. Funeral trusts allow you to set aside money for your future funeral costs. You can establish a funeral trust by depositing money into an interest bearing trust account at your bank. When you die, the trust funds will be disbursed to the funeral home or other service provider that you have designated as the primary beneficiary in the trust agreement. If you enter into the funeral trust directly with the funeral home it may agree to lock in costs for your future services at an agreed upon price. Generally, after the funeral costs have been paid, any amount remaining in the trust will be distributed to your estate.

The trust can be revocable or irrevocable. If the trust is revocable you can change or revoke the trust at any time. However, it will still be part of your taxable estate and counted as a resource for Medicaid purposes. If the trust is irrevocable, it cannot be revoked and the trust proceeds must be used for your funeral. However, it is not counted as a resource for Medicaid purposes. The five year Medicaid look-back period does not apply to Irrevocable Funeral Trusts so it can be funded right before you enter a nursing home.

Another option is to join a funeral society, which will help you find local mortuaries that will deal honestly with your survivors and charge reasonable prices. If you join a society, you will receive a form that allows you to plan for the goods and services you want to get them for a predetermined cost. To find a funeral society near you, you can search the internet at www.funerals.org.

If you have any questions about setting up a Funeral Trust contact Gregory Spadea of Spadea & Associates, LLC at 610-521-0604.

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